A parsimonious model for zero inflation at the zero lower bound

Yuta Takahashi and Naoki Takayama

Economics Letters, 2025, vol. 247, issue C

Abstract: Standard monetary models with representative households typically predict sizable deflation at the zero lower bound of interest rates, yet Japan had experienced near-zero inflation. By replacing infinite-lived households with finite-lived ones, we offer a parsimonious resolution under reasonable parameter values.

Keywords: Zero lower bound; Deflation; Perpetual youth model (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176524006189

DOI: 10.1016/j.econlet.2024.112134

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