EconPapers    
Economics at your fingertips  
 

Liquidity traps in a world economy

Robert Kollmann ()

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper studies a New Keynesian model of a two-country world with a zero lower bound (ZLB) constraint for nominal interest rates. A floating exchange rate regime is assumed. The presence of the ZLB generates multiple equilibria. The two countries can experience recurrent liquidity traps induced by the self-fulfilling expectation that future inflation will be low. These “expectations-driven” liquidity traps can be synchronized or unsynchronized across countries. In an expectations-driven liquidity trap, the domestic and international transmission of persistent shocks to productivity and government purchases differs markedly from shock transmission in a “fundamentals-driven” liquidity trap.

Keywords: Zero lower bound; expectations-driven and fundamentals-driven liquidity traps; domestic and international shock transmission; terms of trade; exchange rate; net exports (search for similar items in EconPapers)
JEL-codes: E3 E4 F2 F3 F4 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2021-01
New Economics Papers: this item is included in nep-cwa, nep-dge, nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://cama.crawford.anu.edu.au/sites/default/fil ... _2021_kollmann_0.pdf (application/pdf)

Related works:
Journal Article: Liquidity traps in a world economy (2021) Downloads
Working Paper: Liquidity Traps in a World Economy (2021) Downloads
Working Paper: Liquidity Traps in a World Economy (2021) Downloads
Working Paper: Liquidity Traps in a World Economy (2021) Downloads
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:een:camaaa:2021-05

Access Statistics for this paper

More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().

 
Page updated 2025-03-30
Handle: RePEc:een:camaaa:2021-05