Clearing Up the Effective Lower Bound Morass
Fuente:
arXiv
Salvato in:
| Autori principali: | , |
|---|---|
| Natura: | Preprint |
| Pubblicazione: |
2025
|
| Soggetti: | |
| Accesso online: | |
| Tags: |
Aggiungi Tag
Nessun Tag, puoi essere il primo ad aggiungerne!!
|
| _version_ | 1866912692855373824 |
|---|---|
| author | Ma, Haochun Roulleau-Pasdeloup, Jordan |
| author_facet | Ma, Haochun Roulleau-Pasdeloup, Jordan |
| contents | Depending on the persistence of the underlying Markov chain shock, the standard New Keynesian model predicts starkly different conclusions at the Effective Lower Bound. We clear up this morass by using a truncated Markov chain. We prove that the expectations-driven trap à la Mertens & Ravn (2014) doesn't arise as an equilibrium outcome. In addition, the equilibrium under a truncated Markov chain is guaranteed to be unique, the effect of government spending is positive on consumption and does not switch signs but may grow unbounded \textemdash a puzzle. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2511_04782 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Clearing Up the Effective Lower Bound Morass Ma, Haochun Roulleau-Pasdeloup, Jordan General Economics Economics Depending on the persistence of the underlying Markov chain shock, the standard New Keynesian model predicts starkly different conclusions at the Effective Lower Bound. We clear up this morass by using a truncated Markov chain. We prove that the expectations-driven trap à la Mertens & Ravn (2014) doesn't arise as an equilibrium outcome. In addition, the equilibrium under a truncated Markov chain is guaranteed to be unique, the effect of government spending is positive on consumption and does not switch signs but may grow unbounded \textemdash a puzzle. |
| title | Clearing Up the Effective Lower Bound Morass |
| topic | General Economics Economics |
| url | https://arxiv.org/abs/2511.04782 |