Speed limit policy and liquidity traps
Taisuke Nakata,
Sebastian Schmidt and
Paul Yoo
No 2192, Working Paper Series from European Central Bank
Abstract:
The zero lower bound (ZLB) constraint on interest rates makes speed limit policies (SLPs) — policies aimed at stabilizing output growth — less effective. Away from the ZLB, the history dependence induced by a concern for output growth stabilization improves the inflation-output tradeoff for a discretionary central bank. However, in the aftermath of a deep recession with a binding ZLB, a central bank with an objective for output growth stabilization aims to engineer a more gradual increase in output than under the standard discretionary policy. The anticipation of a more restrained recovery exacerbates the declines in inflation and output when the lower bound is binding. JEL Classification: E52, E61
Keywords: liquidity traps; Markov-perfect equilibrium; speed limit policy; zero lower bound (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-cba and nep-mon
Note: 2179645
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)
Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2192.en.pdf (application/pdf)
Related works:
Working Paper: Speed Limit Policy and Liquidity Traps (2020) 
Working Paper: Speed Limit Policy and Liquidity Traps (2018) 
Working Paper: Speed Limit Policy and Liquidity Traps (2018) 
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:ecb:ecbwps:20182192
Access Statistics for this paper
More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().