We develop a theoretical framework to quantitatively assess the general equilibrium effects and welfare implications of central bank reputation and transparency. Monetary policy alternates between periods of active inflation stabilization and periods during which the emphasis on inflation...

While high uncertainty is an inherent implication of entering the zero lower bound, deflation is not, because agents are likely to be uncertain about the way policy makers will deal with the large stock of debt arising from a severe recession. We draw this conclusion based on a standard...