Optimal Monetary Policy with r* < 0
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- dc.contributor.author Billi, Roberto M.
- dc.contributor.author Galí, Jordi
- dc.contributor.author Nakov, Anton
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2024-11-14T10:09:28Z
- dc.date.available 2024-11-14T10:09:28Z
- dc.date.issued 2022-03-01
- dc.date.modified 2024-11-14T10:08:33Z
- dc.description.abstract We study the optimal monetary policy problem in a New Keynesian economy with a zero lower bound (ZLB) on the nominal interest rate, and in which the steady state natural rate (r*) is negative. We show that the optimal policy aims to approach gradually a steady state with positive average inflation. Around that steady state, inflation and output fluctuate optimally in response to shocks to the natural rate. The central bank can implement that optimal outcome by means of an appropriate state-contingent rule, even though in equilibrium the nominal rate remains at zero most (or all) of the time. In order to establish that result, we derive sufficient conditions for local determinacy in a more general model with endogenous regime switches.
- dc.format.mimetype application/pdf*
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1830
- dc.identifier.citation Journal of Monetary Economics 142 (2024) 103518
- dc.identifier.uri http://hdl.handle.net/10230/68533
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 1830
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword zero lower bound
- dc.subject.keyword new keynesian model
- dc.subject.keyword decline in r*
- dc.subject.keyword equilibrium determinacy
- dc.subject.keyword regime switching models
- dc.subject.keyword secular stagnation
- dc.subject.keyword Macroeconomics and International Economics
- dc.title Optimal Monetary Policy with r* < 0
- dc.title.alternative
- dc.type info:eu-repo/semantics/workingPaper