Policy Effects in a Simple Fully Non-Linear New Keynesian Model of the Liquidity Trap

Volker Hahn
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Abstract

We analyze a simple yet fully non-linear New Keynesian model with a central bank that pursues an inflation targeting strategy. Our analysis shows that expected adverse productivity shocks may drive the economy into a liquidity trap. As our model entails positive or moderately negative inflation in such a situation, it has the potential to explain the so-called “missing disinflation” in the Great Recession. In contrast with some previous papers, we find that the effects of fiscal policy in a liquidity trap are moderate and that reductions in labor income taxes are expansionary. We do not find support for higher inflation targets. Finally, we provide additional support for the view that the common practice of log-linearizing equilibrium relations can be potentially misleading in models with a lower bound on nominal interest rates.
一个简单的全非线性新凯恩斯流动性陷阱模型中的政策效应
我们分析了一个简单但完全非线性的新凯恩斯模型,该模型有一个奉行通胀目标制的央行。我们的分析表明,预期的不利生产率冲击可能会使经济陷入流动性陷阱。由于我们的模型在这种情况下需要正或适度负的通货膨胀,它有可能解释大衰退中所谓的“缺失的反通货膨胀”。与之前的一些论文相比,我们发现财政政策对流动性陷阱的影响是温和的,而劳动所得税的减少是扩张性的。我们没有发现提高通胀目标的支持。最后,我们为以下观点提供了额外的支持,即对数线性化均衡关系的常见做法在具有名义利率下限的模型中可能具有误导性。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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