Global liquidity trap

Yuki Teranishi, Nao Sudo, Tomoyuki Nakajima and Ippei Fujiwara

AJRC Working Papers from Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University

Abstract: How should monetary policy respond to a global liquidity trap, where the two countries may fall into a liquidity trap simultaneously? Using a two-country New Open Economy Macroeconomics model, we first characterise optimal monetary policy, and show that the optimal rate of inflation in one country is affected by whether or not the other country is in a liquidity trap. We next examine how well the optimal monetary policy is approximated by relatively simple monetary policy rules. The interest-rate rule targeting the producer price index performs very well in this respect.

JEL-codes: E52 E58 F41 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2013
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Related works:
Journal Article: Global liquidity trap (2013)
Working Paper: Global Liquidity Trap (2011)
Working Paper: Global Liquidity Trap (2011)
Working Paper: Global liquidity trap (2010)
Working Paper: Global Liquidity Trap (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:csg:ajrcwp:1304

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