Are Negative Supply Shocks Expansionary at the Zero Lower Bound?

Johannes Wieland

Journal of Political Economy, 2019, vol. 127, issue 3, 973 - 1007

Abstract: The standard new Keynesian model predicts that economies behave differently at the zero lower bound: completely wasteful government spending or forward guidance is very stimulative, and capital destruction or oil supply shocks are expansionary. I provide empirical evidence on this prediction and find it wanting: The Great East Japan Earthquake and oil supply shocks are contractionary at the zero lower bound. Modifications of the model that are consistent with this evidence also overturn other unusual policy predictions, such as large fiscal multipliers. My results suggest that many of the usual rules of economics continue to hold at zero nominal interest rates.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (52)

Downloads: (external link)
http://dx.doi.org/10.1086/701421 (application/pdf)
http://dx.doi.org/10.1086/701421 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:doi:10.1086/701421

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().