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Infrequent but Long-Lived Zero-Bound Episodes and the Optimal Rate of Inflation / Marc Dordal-i-Carreras, Olivier Coibion, Yuriy Gorodnichenko, Johannes Wieland.
- Format:
- Book
- Author/Creator:
- Dordal-i-Carreras, Marc.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w22510.
- NBER working paper series no. w22510
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2016.
- Summary:
- 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.
- Notes:
- Print version record
- August 2016.
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