òòò½Íø Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Understanding Persistent ZLB: Theory and Assessment
òòò½Íø Journal: Macroeconomics
vol. 16,
no. 3, July 2024
(pp. 389–416)
Abstract
We develop a theoretical framework that rationalizes two hypotheses of long-lasting low-interest rate episodes: deflationary-expectations-traps and secular stagnation in a unified setting. These hypotheses differ in the sign of the theoretical correlation between inflation and output growth that they imply. Using the data from Japan over 1998:I–2019:IV, we find that the data favor the expectations-trap hypothesis. The superior model fit of the expectations trap relies on its ability to generate the observed negative correlation between inflation and output growth.Citation
Cuba-Borda, Pablo, and Sanjay R. Singh. 2024. "Understanding Persistent ZLB: Theory and Assessment." òòò½Íø Journal: Macroeconomics 16 (3): 389–416. DOI: 10.1257/mac.20210453Additional Materials
JEL Classification
- E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
- E31 Price Level; Inflation; Deflation
- E32 Business Fluctuations; Cycles
- E43 Interest Rates: Determination, Term Structure, and Effects
- E52 Monetary Policy