-target inflation requires real and nominal depreciation of the exchange rate. However, because of adverse income and valuation effects … from real depreciation, the escape can be beggar thy self, raising employment but actually lowering welfare. We show that … enhance the monetary authorities' ability to rescue the economy from stagnation …

Concerns of prolonged stagnation periods with near-zero interest rates and deflation have become widespread in many …-trap and secular stagnation in a unified setting. We analytically derive contrasting policy implications under each hypothesis … and identify robust policies that eliminate expectations-trap and reduce the severity of secular stagnation episodes. We …