Nonlinear Adventures at the Zero Lower Bound

Rubio-Ramírez, Juan Francisco, Fernández-Villaverde, Jesús, Pablo Guerron and Grey Gordon
Authors registered in the RePEc Author Service: Juan F Rubio-Ramirez and Jesus Fernandez-Villaverde

No 8972, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Motivated by the recent experience of the U.S. and the Eurozone, we describe the quantitative properties of a New Keynesian model with a zero lower bound (ZLB) on nominal interest rates, explicitly accounting for the nonlinearities that the bound brings. Besides showing how such a model can be efficiently computed, we find that the behavior of the economy is substantially affected by the presence of the ZLB. In particular, we document 1) the unconditional and conditional probabilities of hitting the ZLB; 2) the unconditional and conditional probabilty distributions of the duration of a spell at the ZLB; 3) the responses of output to government expenditure shocks at the ZLB, 4) the distribution of shocks that send the economy to the ZLB; and 5) the distribution of shocks that keep the economy at the ZLB.

Keywords: New keynesian models; Nonlinear solution methods.; Zero lower bound (search for similar items in EconPapers)
JEL-codes: E30 E50 E60 (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

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Journal Article: Nonlinear adventures at the zero lower bound (2015)
Working Paper: Nonlinear adventures at the zero lower bound (2012)
Working Paper: Nonlinear Adventures at the Zero Lower Bound (2012)
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