Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098247 | Journal of Economic Dynamics and Control | 2015 | 23 Pages |
Abstract
In this paper, we argue for the importance of explicitly considering nonlinearities in analyzing the behavior of the New Keynesian model with a zero lower bound (ZLB) of the nominal interest rate. To show this, we report how the decision rules and the equilibrium dynamics of the model are substantially affected by the nonlinear features brought about by the ZLB. We also illustrate a tension between the length of a spell at the ZLB and the drop in consumption there.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Jesús Fernández-Villaverde, Grey Gordon, Pablo Guerrón-Quintana, Juan F. Rubio-RamÃrez,