Does fiscal policy have qualitatively different effects on the economy in a liquidity trap? We analyze a nonlinear stochastic New Keynesian model and compare the true and loglinearized equilibria. Using the loglinearized equilibrium conditions, the answer to the above question is yes. However,...

This paper provides a critique of zero lower bound (ZLB) economics which has become the new orthodoxy for explaining stagnation. ZLB economics is an extension of pre-Keynesian economics which attributes macroeconomic dysfunction to rigidities and market imperfections. The ZLB is the latest...

This article integrates monetary policy into a very simple dynamic supermultiplier model with an accommodating supply side. Results show that monetary policy guided by a conventional Taylor rule may stabilize an economy around the steady-state path of demand-led growth following temporary demand...

The fall in risk free interest rates since the 1980s has mostly been described as being induced by factors that push down interest rates from the demand side. This paper contributes to the literature by adding a view of the supply side, namely that interest has to be earned first, before it can...

This paper explores zero lower bound (ZLB) economics. The ZLB is widely invoked to explain stagnation and it fits with the long tradition that argues Keynesian economics is a special case based on nominal rigidities. The ZLB represents the newest rigidity. Contrary to ZLB economics, not only...

Major central banks remunerate reserves at negative interest rates and it is increasingly likely that they will keep rates negative for many more years. To study the long run implications of negative rates, we construct a dynamic general equilibrium model with commercial banks funding investment...

This paper provides new empirical evidence that bears on the efficacy of unconventional monetary policies when the main policy rate is negative. When a negative interest rate policy (NIRP) is deployed in concert with rate forward guidance (FG) and quantitative easing (QE), the identification of...

John Maynard Keynes (1930) asserted that the central bank sways the long-term interest rate through the influence of its policy rate on the short-term interest rate. Recent empirical research shows that Keynes's conjecture holds for long-term Treasury yields in the United States. This paper...