Bodenstein, Martin; Erceg, Christopher J.; Guerrieri, Luca - Federal Reserve Board (Board of Governors of the … - 2009
In a two-country DSGE model, the effects of foreign demand shocks on the home country are greatly amplified if the home economy is constrained by the zero lower bound for policy interest rates. This result applies even to countries that are relatively closed to trade such as the United States....