Recent research has found that the dynamic properties of the New Keynesian model can be very different when the nominal interest rate is zero. Improvements in technology and reductions in the labor tax rate lower economic activity, and the size of the government purchase output multiplier can be...

Recent research has found that the dynamic properties of the New Keynesian model are unorthodox when the nominal interest rate is zero. Improvements in technology and reductions in the labor tax rate lower economic activity and the size of the government purchase output multiplier is very large....