give rise to persistent liquidity trap episodes. There is no straightforward recipe for enhancing welfare in this economy … less concerned with government spending stabilization than society eliminates expectations-driven liquidity traps …

In expectations-driven liquidity traps, a higher inflation target is associated with lower inflation and consumption …. As a result, introducing the possibility of expectations-driven liquidity traps to an otherwise standard model lowers the … interest rates, we find that even a very small probability of falling into an expectations-driven liquidity trap lowers the …