Effective Lower Bound

Tobias Adrian · Christopher Erceg · Marcin Kolasa · Jesper Lindé · Pawel Zabczyk

A microfounded two-country New Keynesian model, calibrated separately to a representative emerging market and a representative advanced economy, in which limited FX-market risk-bearing capacity and an …

Tobias Adrian · Christopher Erceg · Jesper Lindé · Pawel Zabczyk · Jianping Zhou

An empirically-oriented New Keynesian small open economy model, of the kind central banks use, built to quantify when foreign exchange intervention and capital flow management tools improve monetary …

Marco J. Lombardi · Feng Zhu

This 2018 International Journal of Central Banking paper by Marco J. Lombardi and Feng Zhu proposes a "shadow policy rate" for U.S.

Emmanuel Farhi · Iván Werning

This paper builds a theory of macroprudential policy whose only friction is nominal rigidity in goods and labor markets, possibly combined with a constraint on monetary policy such as the zero lower …

Jess Benhabib · Stephanie Schmitt-Grohé · Martín Uribe

Because a Taylor-type interest-rate rule must be consistent with the zero nominal-interest-rate bound, it always admits a second, unintended steady state with low or negative inflation alongside the …

Valerie A. Ramey

Surveying theory, aggregate U.S. time-series evidence, and the newer cross-state/cross-locality literature on the government-spending multiplier, Ramey concludes that the multiplier for a temporary, …

Veronica Guerrieri · Guido Lorenzoni

This 2017 *Quarterly Journal of Economics* paper (circulated as NBER Working Paper 17583, November 2011) asks how an economy adjusts when households' ability to borrow is suddenly and permanently …

Mariano Kulish · James Morley · Tim Robinson

This 2017 Journal of Monetary Economics paper by Mariano Kulish, James Morley, and Tim Robinson addresses a practical problem in Bayesian estimation of DSGE models: once the policy rate is pinned at …

Hanno Kase · Leonardo Melosi · Matthias Rottner

By treating a nonlinear model's own parameters as extra "pseudo state variables" that a neural network learns to solve for across the entire parameter space at once, and by training a second network …

Valerie A. Ramey · Sarah Zubairy

Using a newly constructed quarterly US data set spanning 1889–2015 — built specifically to include the large wars and deep recessions that the post-WWII sample most of the literature relies on simply …

Paul R. Krugman

Krugman argues that Japan's stagnation in the 1990s, with short-term interest rates pinned near zero and conventional monetary expansion seemingly powerless, is a genuine instance of the classical …

Javier Bianchi · Louphou Coulibaly

The paper develops a tractable open-economy New Keynesian model with nominal rigidities and an occasionally binding zero lower bound (ZLB) to study how monetary policy and macroprudential policy …

Morten O. Ravn · Vincent Sterk

A HANK model that is tractable enough to solve on paper, built by grafting Diamond-Mortensen-Pissarides search frictions onto a New Keynesian economy and then imposing assumptions that make the wealth …

Iván Werning

Working with a continuous-time New Keynesian model, this paper shows that discretionary monetary policy during a liquidity trap produces deflation and depression that get worse, not better, as prices …

Andreas Schaab

Using a new global solution method for a HANK model with counter-cyclical unemployment risk and a zero lower bound, this job-market paper shows that the dominant transmission channel of macroeconomic …

Ben S. Bernanke · Vincent R. Reinhart · Brian P. Sack

This 2004 Brookings Papers on Economic Activity paper by Ben Bernanke, Vincent Reinhart, and Brian Sack asks whether "nonstandard" monetary policies can still work once the short-term policy rate is …

Sandra Daudignon · Oreste Tristani

This paper analyzes how monetary policy should respond to a long-run natural interest rate that can drift permanently — following a bounded random walk with upper bound 3 percent and lower bound 0 …

Sebastian Di Tella

This paper builds a flexible-price model in which money's liquidity premium keeps real interest rates from falling when idiosyncratic risk rises, so money reduces investment rather than stabilizing …

Michael Woodford

This paper works through a series of simple, analytically solvable New Keynesian models to show that the size of the government-spending multiplier depends almost entirely on the monetary policy …

Michael T. Belongia · Peter N. Ireland

This 2018 International Journal of Central Banking paper by Michael T. Belongia and Peter N.

Alan J. Auerbach · Maurice Obstfeld

Auerbach and Obstfeld argue that even if money and bonds are perfect substitutes at a zero short-term nominal interest rate -- the textbook reason open-market operations are said to be powerless in a …

Vasco Cúrdia · Michael Woodford

Extending a New Keynesian model to give the central bank's balance sheet a genuine role in equilibrium determination, the authors distinguish three independent dimensions of monetary policy -- the …

Olivier Coibion · Yuriy Gorodnichenko · Johannes Wieland

This 2012 Review of Economic Studies paper by Olivier Coibion, Yuriy Gorodnichenko, and Johannes Wieland asks what rate of steady-state (trend) inflation maximizes welfare in a New Keynesian DSGE …

Jess Benhabib · Stephanie Schmitt-Grohé · Martín Uribe

Benhabib, Schmitt-Grohe, and Uribe show that active interest-rate feedback ("Taylor") rules -- which raise the nominal rate more than one-for-one with inflation and are conventionally recommended as …

Vadym Lepetyuk · Lilia Maliar · Serguei Maliar · John B. Taylor

When a central bank announces a policy it will not implement for some time, households and firms respond straight away. This paper measures how much of a policy's effect arrives in that anticipation …

Gauti B. Eggertsson · Michael Woodford

This 2003 Brookings Papers on Economic Activity article by Gauti Eggertsson and Michael Woodford builds a fully dynamic New Keynesian general-equilibrium model — Calvo (1983) staggered pricing, money …

David Bügel · Albert Hidalgo · Ralph Luetticke

Asking whether unconventional monetary policy works differently from an interest-rate cut has been hard to answer because the two kinds of policy have been measured with different tools, so any …

Lawrence Christiano · Martin Eichenbaum · Sergio Rebelo

The government-spending multiplier can be much larger than one when the zero lower bound on the nominal interest rate binds, and the larger the fraction of the spending that occurs while the nominal …