Nonlinear Adventures at the Zero Lower Bound

Jesus Fernandez-Villaverde, Grey Gordon, Pablo Guerron and Juan F Rubio-Ramirez

No 18058, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Motivated by the recent experience of the U.S. and the Eurozone, we describe the quantitative properties of a New Keynesian model with a zero lower bound (ZLB) on nominal interest rates, explicitly accounting for the nonlinearities that the bound brings. Besides showing how such a model can be efficiently computed, we find that the behavior of the economy is substantially affected by the presence of the ZLB. In particular, we document 1) the unconditional and conditional probabilities of hitting the ZLB; 2) the unconditional and conditional probabilty distributions of the duration of a spell at the ZLB; 3) the responses of output to government expenditure shocks at the ZLB, 4) the distribution of shocks that send the economy to the ZLB; and 5) the distribution of shocks that keep the economy at the ZLB.

JEL-codes: E30 E50 E60 (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-mac
Note: EFG
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Citations: View citations in EconPapers (85)

Published as Fernández-Villaverde, Jesús & Gordon, Grey & Guerrón-Quintana, Pablo & Rubio-Ramírez, Juan F., 2015. "Nonlinear adventures at the zero lower bound," Journal of Economic Dynamics and Control, Elsevier, vol. 57(C), pages 182-204.

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Journal Article: Nonlinear adventures at the zero lower bound (2015)
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Working Paper: Nonlinear adventures at the zero lower bound (2012)
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