Zero Lower Bound (ZLB) Economics

Thomas Palley

No 164-2016, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: This paper explores zero lower bound (ZLB) economics. The ZLB is widely invoked to explain stagnation and it fits with the long tradition that argues Keynesian economics is a special case based on nominal rigidities. The ZLB represents the newest rigidity. Contrary to ZLB economics, not only does a laissez-faire monetary economy lack a mechanism for delivering the natural rate of interest, it may also lack such an interest rate. Moreover, the ZLB can be a stabilizing rigidity that prevents negative nominal interest rates exacerbating excess supply conditions.

Keywords: zero lower bound (ZLB); stagnation; New Keynesianism; normal rigidities (search for similar items in EconPapers)
JEL-codes: E0 E10 E12 E20 E40 E50 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2016
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:imk:wpaper:164-2016

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