Zero Lower Bound on Inflation Expectations
In: NBER Working Paper No. w29496
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In: NBER Working Paper No. w29496
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In: Journal of Monetary Economics, Band 117, S. 296-315
We document a new fact: in U.S., European and Japanese surveys, households do not expect deflation, even in environments where persistent deflation is a strong possibil- ity. This fact stands in contrast to the standard macroeconomic models with rational expectations. We extend a standard New Keynesian model with a zero-lower bound on inflation expectations. Unconventional monetary policies, such as forward guid- ance, are weaker. In liquidity traps, the government spending output multiplier is finite, and adverse aggregate supply shocks are not expansionary. The possibility of confidence-driven liquidity traps is attenuated.
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In: CEPR Discussion Paper No. DP15282
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Working paper
In: CEPR Discussion Paper No. DP13100
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In: Journal of monetary economics, Band 124, S. S1-S18
In: NBER Working Paper No. w18128
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Working paper
Using a rich data set on government spending forecasts in Japan, we provide new evidence on the effects of unexpected changes in government spending when the nominal interest rate is near the zero lower bound (ZLB). The on-impact output multiplier is 1.5 in the ZLB period, and 0.6 outside of it. We estimate that government spending shocks increase both private consumption and investment during the ZLB period but crowd them out in the normal period. There is evidence that expected inflation increases by more in the ZLB period than in the normal period.
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Working paper
In: CEPR Discussion Paper No. DP11633
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Working paper