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)
