Endogenous Persistence at the Effective Lower Bound

• Tác giả: Chunbing Cai, Jordan Roulleau-Pasdeloup, Zhongxi Zheng
• Ngôn ngữ: eng
• Ký hiệu phân loại: 155.96 Influence of restrictive environments
• Thông tin xuất bản: 2025
• Bộ sưu tập: Metadata
• ID: 205717

Tóm tắt

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.