Liquidity traps in a monetary union

Robert Kollmann ()

Oxford Economic Papers, 2021, vol. 73, issue 4, 1581-1603

Abstract: The closed economy macro literature has shown that a liquidity trap can result from the self-fulfilling expectation that future inflation and output will be low. This paper investigates expectations-driven liquidity traps in a two-country New Keynesian model of a monetary union. In the model here, a rise in government purchases in an individual country has a weak effect on GDP in the rest of the union. The results here cast doubt on the view that, in the current era of ultra-low interest rates, a rise in fiscal spending by Euro Area (EA) core countries would significantly boost GDP in the EA periphery.

JEL-codes: E31 E32 E43 F33 F41 F44 F45 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Liquidity Traps in a Monetary Union (2020)
Working Paper: Liquidity Traps in a Monetary Union (2020)
Working Paper: Liquidity traps in a monetary union (2020)
Working Paper: Liquidity Traps in a Monetary Union (2020)
Working Paper: Liquidity Traps in a Monetary Union (2020)
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