Citation

Discussion Paper Details

Please find the details for DP8972 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Nonlinear Adventures at the Zero Lower Bound

Author(s): Jesús Fernández-Villaverde, Grey Gordon, Pablo A. Guerron-Quintana and Juan Francisco Rubio-Ramírez

Publication Date: May 2012

Keyword(s): New Keynesian models, Nonlinear solution methods. and Zero lower bound

Programme Area(s): International Macroeconomics

Abstract: 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.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8972

Bibliographic Reference

Fernández-Villaverde, J, Gordon, G, Guerron-Quintana, P and Rubio-Ramírez, J. 2012. 'Nonlinear Adventures at the Zero Lower Bound'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8972