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Persistent link: https://www.econbiz.de/10011948074
Standard New Keynesian models predict implausibly large and favorable responses of inflation and output to expansionary forward guidance on interest rates. We find that the introduction of permanent or recurring active fiscal policy dampens the response of output and inflation to forward...
Persistent link: https://www.econbiz.de/10012908747
This paper examines the uniqueness and learnability of rational expectations equilibrium when the policy rate is occasionally pegged at the zero lower bound (ZLB). We consider a model that features recurring, transient ZLB regimes and compare various interest rate rules which respond to...
Persistent link: https://www.econbiz.de/10013231398
New Keynesian models generate puzzles when confronted with the zero lower bound (ZLB) on nominal interest rates (e.g. the forward guidance puzzle or the paradox of flexibility). We show that these puzzles are absent in simple and medium-scale models when monetary policy approximates optimal...
Persistent link: https://www.econbiz.de/10014532452
Persistent link: https://www.econbiz.de/10012116526
We evaluate and compare alternative monetary policy rules, namely average inflation targeting, price level targeting, and traditional inflation targeting rules, in a standard New Keynesian model that features recurring, transient zero lower bound regimes. We use determinacy and expectational...
Persistent link: https://www.econbiz.de/10012665278
We evaluate and compare alternative monetary policy rules, namely average inflation targeting, price level targeting, and traditional inflation targeting rules, in a standard New Keynesian model that features recurring, transient zero lower bound regimes. We use determinacy and expectational...
Persistent link: https://www.econbiz.de/10013314662
Persistent link: https://www.econbiz.de/10014471851
Standard models predict implausible responses to forward guidance announcements when interest rates are pegged (the ``forward guidance puzzle"). This paper develops conditions for regime-switching models to exhibit a forward guidance puzzle, and shows when the fiscal theory of the price level...
Persistent link: https://www.econbiz.de/10014098004
Persistent link: https://www.econbiz.de/10011327629