Step away from the zero lower bound : small open economies in a world of secular stagnation
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- dc.contributor.author Corsetti, Giancarloca
- dc.contributor.author Mavroeidi, Eleonoraca
- dc.contributor.author Thwaites, Gregoryca
- dc.contributor.author Wolf, Martinca
- dc.date.accessioned 2018-09-27T12:17:16Z
- dc.date.available 2018-09-27T12:17:16Z
- dc.date.issued 2018-05
- dc.description.abstract We study how small open economies can escape from deation and unemployment in a situation where the world economy is permanently depressed. Building on the framework of Eggertsson et al. (2016), we show that the transition to full employment and at-target inflation requires real and nominal depreciation of the exchange rate. However, because of adverse income and valuation effects from real depreciation, the escape can be beggar thy self, raising employment but actually lowering welfare. We show that as long as the economy remains financially open, domestic asset supply policies or reducing the effective lower bound on policy rates may be inffective or even counterproductive. However, closing domestic capital markets does not necessarily enhance the monetary authorities' ability to rescue the economy from stagnation.ca
- dc.description.sponsorship The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
- dc.format.mimetype application/pdfca
- dc.identifier.uri http://hdl.handle.net/10230/35527
- dc.language.iso engca
- dc.relation.ispartofseries ADEMU Working Paper Series;132
- dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/649396
- dc.rights This is an Open Access article distributed under the terms of the Creative Commons Attribution License Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution and reproduction in any medium provided that the original work is properlyattributed.ca
- dc.rights.accessRights info:eu-repo/semantics/openAccessca
- dc.rights.uri https://creativecommons.org/licenses/by/4.0/ca
- dc.subject.other Small open economyca
- dc.subject.other Secular stagnationca
- dc.subject.other Capital controlsca
- dc.subject.other Optimal policyca
- dc.subject.other Zero lower boundca
- dc.title Step away from the zero lower bound : small open economies in a world of secular stagnationca
- dc.type info:eu-repo/semantics/workingPaperca