Year: 2016
Type: report
Abstract: Countries rarely hit the zero-lower bound on interest rates, but when they do, these episodes tend to be very long-lived.These two features are difficult to jointly incorporate into macroeconomic models using typical representations of shock processes.We introduce a regime switching representation of risk premium shocks into an otherwise standard New Keynesian model to generate a realistic distribution of ZLB durations.We discuss what different calibrations of this model imply for optimal inflation rates.
DOI: 10.3386/w22510
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2889570418