Benhabib, Jess; Schmitt-Grohe, Stephanie; Uribe, Martin - In: Journal of Political Economy 110 (2002) 3, pp. 535-563
Once the zero bound on nominal interest rates is taken into account, Taylor-type interest rate feedback rules give rise to unintended self-fulfilling decelerating inflation paths and aggregate fluctuations driven by arbitrary revisions in expectations. These undesirable equilibria exhibit the...