Nonlinear Adventures at the Zero Lower Bound / Jesús Fernández-Villaverde, Grey Gordon, Pablo A. Guerrón-Quintana, Juan Rubio-Ramírez.

Format:

Book

Author/Creator:

Fernández-Villaverde, Jesús.

Contributor:

National Bureau of Economic Research.

Gordon, Grey.

Guerrón-Quintana, Pablo A.

Rubio-Ramírez, Juan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18058.

NBER working paper series no. w18058

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

Motivated by the recent experience of the U.S. and the Eurozone, we describe the quantitative properties of a New Keynesian model with a zero lower bound (ZLB) on nominal interest rates, explicitly accounting for the nonlinearities that the bound brings. Besides showing how such a model can be efficiently computed, we find that the behavior of the economy is substantially affected by the presence of the ZLB. In particular, we document 1) the unconditional and conditional probabilities of hitting the ZLB; 2) the unconditional and conditional probabilty distributions of the duration of a spell at the ZLB; 3) the responses of output to government expenditure shocks at the ZLB, 4) the distribution of shocks that send the economy to the ZLB; and 5) the distribution of shocks that keep the economy at the ZLB.

Notes:

Print version record

May 2012.