Liquidity traps
Subtitle: an interest-rate-based exit strategy
By: Stephanie Schmitt-Grohé, Martín Uribe
Contributors: Uribe, Martín; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16514; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16514.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] :
Description: "This paper analyzes a potential strategy for escaping liquidity traps.  The strategy is based on an augmented Taylor-type interest-rate feedback rule and differs from usual specifications in that when inflation falls below a threshold, the central bank temporarily deviates from the traditional Taylor rule by following a deterministic path for the nominal interest rate.  This path reaches the intended target for this policy instrument in finite time.  The policy we study is designed to raise inflationary expectations over time while at the same time maintaining all of the desirable local properties of the Taylor principle in a neighborhood of the intended inflation target.  Importantly, the effectiveness of the potential exit strategy studied in this paper does not rely on the existence of an accompanying fiscalist (or non-Ricardian) fiscal stance"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 3/22/2011.

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