New Keynesian Dynamics in a Low Interest Rate Environment

R. Braun and Lena Mareen Korber
Additional contact information
Lena Mareen Korber: German Institute for Economic Research (E-mail: Lenakoerber@gmail.com)

No 10-E-05, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: Recent research has found that the dynamics of the New Keynesian model are very different when the nominal interest rate is zero. Improvements in technology shocks and reductions in the labor tax rate lower economic activity and the size of the government purchase multiplier can be as large as four. We consider the empirical relevance of these dynamics using Japanese data. Japan is interesting because it experienced a protracted period of zero nominal interest rates. A prototypical New Keynesian model calibrated to Japan and solved using nonlinear methods exhibits orthodox dynamics with a government purchase multiplier that is less than one.

Keywords: Government purchases; zero nominal interest rates; monetary policy (search for similar items in EconPapers)
JEL-codes: E3 E5 E6 (search for similar items in EconPapers)
Date: 2010-03
New Economics Papers: this item is included in nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: New Keynesian dynamics in a low interest rate environment (2011)
Working Paper: New Keynesian dynamics in a low interest rate environment (2011)
Working Paper: New Keynesian Dynamics in a Low Interest Rate Environment (2010)
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