skip to content

Faculty of Economics

Journal Cover

Tambakis,D.N.

Determinate liquidity traps

Economics Letters

Vol. 135 pp. 126-132 (2015)

Abstract: I study the long run determinacy tradeoff–recurrent episodes of passive monetary policy are (in)determinate if their expected duration is long (brief )–when passive policy is at the zero bound. On-going regime change implies qualitatively different shock transmission from the standard New Keynesian model. For US baseline parameter values, I find temporary fiscal stimulus is effective, while adverse supply shocks can be expansionary if the central bank’s active policy stance is weak and/or if the liquidity trap’s average duration exceeds 33 quarters.

Keywords: Zero bound, Monetary policy, Regime-switching, Determinacy

JEL Codes: E31, E52, E58, E61

Author links: Demosthenes N.  Tambakis  

Publisher's Link: http://www.sciencedirect.com/science/article/pii/S0165176515003110



Cambridge Working Paper in Economics Version of Paper: Determinate liquidity traps, Tambakis, D., (2015)

Papers and Publications



Recent Publications


Porzio, T., Rossi, F. and Santangelo, G. The Human Side of Structural Transformation American Economic Review [2022]

Bhattacharya, D., Dupas, P. and Kanaya, S. Demand and Welfare Analysis in Discrete Choice Models with Social Interactions Review of Economic Studies [2023]

Bhattacharya, D. and Komarova, T. Incorporating Social Welfare in Program-Evaluation and Treatment Choice Review of Economics and Statistics, accepted [2023]

Gallo, E. and Yan, C. Efficiency and Equilibrium in Network Games: An Experiment Review of Economics and Statistics [2023]