Korinek, Anton; Simsek, Alp - International Monetary Fund (IMF) - 2014
' exante leverage and insurance decisions are associated with aggregate demand externalities. The competitive equilibrium … unconstrained agents to pick up the decline in aggregate demand. However, if the fall in the interest rate is limited by the zero … lower bound, aggregate demand is insufficient and the economy enters a liquidity trap. In such an environment, agents …