Supply-Side Policies and the Zero Lower Bound
Jesus Fernandez-Villaverde,
Pablo Guerron and
Juan F Rubio-Ramirez
IMF Economic Review, 2014, vol. 62, issue 2, 248-260
Abstract:
Supply-side policies can play a role in fighting a low aggregate demand that traps an economy at the zero lower bound (ZLB) of nominal interest rates. Reductions in mark-ups or future increases in productivity triggered by supply-side policies generate a wealth effect that pulls current consumption and output up. Since the economy is at the ZLB, increases in interest rates do not undo this wealth effect. The paper illustrates this mechanism with a New Keynesian model.
Date: 2014
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Related works:
Working Paper: Supply-Side Policies and the Zero Lower Bound (2012) 
Working Paper: Supply-Side Policies and the Zero Lower Bound (2011) 
Working Paper: Supply-side policies and the zero lower bound (2011) 
Working Paper: Supply-Side Policies and the Zero Lower Bound (2011) 
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