Endogenous Persistence at the Effective Lower Bound
Fuente:
arXiv
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| Autores principales: | , , |
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| Formato: | Preprint |
| Publicado: |
2025
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| _version_ | 1866918134590472192 |
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| author | Cai, Chunbing Roulleau-Pasdeloup, Jordan Zheng, Zhongxi |
| author_facet | Cai, Chunbing Roulleau-Pasdeloup, Jordan Zheng, Zhongxi |
| contents | We develop a perfect foresight method to solve models with an interest rate lower bound constraint that nests OccBin/DynareOBC and \cite{Eggertsson2010}'s as well as \cite{Mertens2014}'s pen and paper solutions as special cases. Our method generalizes the pen-and-paper solutions by allowing for endogenous persistence while maintaining tractability and interpretability. We prove that our method necessarily gives stable multipliers. We use it to solve a New Keynesian model with habit formation and government spending, which we match to expectations data from the Great Recession. We find an output multiplier of government spending close to 1 for the US and Japan. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2501_06473 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Endogenous Persistence at the Effective Lower Bound Cai, Chunbing Roulleau-Pasdeloup, Jordan Zheng, Zhongxi General Economics Economics We develop a perfect foresight method to solve models with an interest rate lower bound constraint that nests OccBin/DynareOBC and \cite{Eggertsson2010}'s as well as \cite{Mertens2014}'s pen and paper solutions as special cases. Our method generalizes the pen-and-paper solutions by allowing for endogenous persistence while maintaining tractability and interpretability. We prove that our method necessarily gives stable multipliers. We use it to solve a New Keynesian model with habit formation and government spending, which we match to expectations data from the Great Recession. We find an output multiplier of government spending close to 1 for the US and Japan. |
| title | Endogenous Persistence at the Effective Lower Bound |
| topic | General Economics Economics |
| url | https://arxiv.org/abs/2501.06473 |