Code for Expectations-Driven Liquidity Traps: Implications for Monetary and Fiscal Policy
Principal Investigator(s): View help for Principal Investigator(s) Taisuke Nakata, University of Tokyo; Sebastian Schmidt, European Central Bank
Version: View help for Version V1
| Name | File Type | Size | Last Modified |
|---|---|---|---|
| Model_appendix_F | 03/29/2021 09:14:AM | ||
| Model_appendix_H | 03/29/2021 09:16:AM | ||
| Model_appendix_I | 03/29/2021 09:18:AM | ||
| Model_section_6 | 02/24/2021 03:10:AM | ||
| Two_state_model | 03/29/2021 09:09:AM | ||
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application/pdf | 123.7 KB | 03/29/2021 05:11:AM |
Project Citation:
Nakata, Taisuke, and Schmidt, Sebastian . Code for Expectations-Driven Liquidity Traps: Implications for Monetary and Fiscal Policy. Nashville, TN: American Economic Association [publisher], 2022. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2022-09-28. https://doi.org/10.3886/E133182V1
Project Description
Summary:
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Abstract: We study optimal time-consistent monetary and fiscal policy in a New Keynesian model where occasional declines in agents' confidence give rise to persistent liquidity trap episodes. Insights from widely-studied fundamental-driven liquidity traps are not a useful guide for enhancing welfare in this model. Raising the inflation target, appointing an inflation-conservative central banker, or allowing for the use of government spending as an additional stabilization tool can exacerbate deflationary pressures and demand deficiencies during the liquidity trap episodes. However, appointing a policymaker who is sufficiently less concerned with government spending stabilization than society eliminates expectations-driven liquidity traps.
Scope of Project
Subject Terms:
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Effective Lower Bound;
Sunspot Equilibria;
Monetary Policy;
Fiscal Policy;
Discretion;
Policy Delegation
JEL Classification:
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E52 Monetary Policy
E61 Policy Objectives; Policy Designs and Consistency; Policy Coordination
E62 Fiscal Policy
E52 Monetary Policy
E61 Policy Objectives; Policy Designs and Consistency; Policy Coordination
E62 Fiscal Policy
Data Type(s):
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program source code
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