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  • Tayler and Zilberman JEDC 2024

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Unconventional Policies in State-Dependent Liquidity Traps

Research output: Contribution to Journal/Magazine › Journal article › peer-review

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Unconventional Policies in State-Dependent Liquidity Traps. / Tayler, William J.; Zilberman, Roy.
In: Journal of Economic Dynamics and Control, Vol. 168, 104956, 30.11.2024.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Tayler, WJ & Zilberman, R 2024, 'Unconventional Policies in State-Dependent Liquidity Traps', Journal of Economic Dynamics and Control, vol. 168, 104956. https://doi.org/10.1016/j.jedc.2024.104956

APA

Tayler, W. J., & Zilberman, R. (2024). Unconventional Policies in State-Dependent Liquidity Traps. Journal of Economic Dynamics and Control, 168, Article 104956. https://doi.org/10.1016/j.jedc.2024.104956

Vancouver

Tayler WJ, Zilberman R. Unconventional Policies in State-Dependent Liquidity Traps. Journal of Economic Dynamics and Control. 2024 Nov 30;168:104956. Epub 2024 Sept 12. doi: 10.1016/j.jedc.2024.104956

Author

Tayler, William J. ; Zilberman, Roy. / Unconventional Policies in State-Dependent Liquidity Traps. In: Journal of Economic Dynamics and Control. 2024 ; Vol. 168.

Bibtex

@article{cd7355e546704387a8d0b0575e3f467c,
title = "Unconventional Policies in State-Dependent Liquidity Traps",
abstract = "We characterize optimal unconventional monetary and fiscal-financial policies against supply- and demand-driven liquidity traps within a tractable New Keynesian model featuring a cash-in-advance constraint and a monetary policy cost channel. Deposit subsidies circumvent the inflation-output trade-off arising from stagflationary shocks and supply-driven liquidity traps by enabling negative nominal interest rates. Additionally, deposit taxes facilitate modest interest rate hikes to escape demand-driven deflationary traps. Notably, discretionary and commitment policies with deposit taxes / subsidies deliver virtually equivalent welfare gains, rendering time-inconsistent forward guidance schedules unnecessary. We also derive robust and implementable optimal policy rules when the sources of shocks are unknown.",
keywords = "Deposit Tax-Subsidy, Cost Channel, Optimal Policy, Discretion vs. Commitment, Zero Lower Bound",
author = "Tayler, {William J.} and Roy Zilberman",
year = "2024",
month = nov,
day = "30",
doi = "10.1016/j.jedc.2024.104956",
language = "English",
volume = "168",
journal = "Journal of Economic Dynamics and Control",
issn = "0165-1889",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - Unconventional Policies in State-Dependent Liquidity Traps

AU - Tayler, William J.

AU - Zilberman, Roy

PY - 2024/11/30

Y1 - 2024/11/30

N2 - We characterize optimal unconventional monetary and fiscal-financial policies against supply- and demand-driven liquidity traps within a tractable New Keynesian model featuring a cash-in-advance constraint and a monetary policy cost channel. Deposit subsidies circumvent the inflation-output trade-off arising from stagflationary shocks and supply-driven liquidity traps by enabling negative nominal interest rates. Additionally, deposit taxes facilitate modest interest rate hikes to escape demand-driven deflationary traps. Notably, discretionary and commitment policies with deposit taxes / subsidies deliver virtually equivalent welfare gains, rendering time-inconsistent forward guidance schedules unnecessary. We also derive robust and implementable optimal policy rules when the sources of shocks are unknown.

AB - We characterize optimal unconventional monetary and fiscal-financial policies against supply- and demand-driven liquidity traps within a tractable New Keynesian model featuring a cash-in-advance constraint and a monetary policy cost channel. Deposit subsidies circumvent the inflation-output trade-off arising from stagflationary shocks and supply-driven liquidity traps by enabling negative nominal interest rates. Additionally, deposit taxes facilitate modest interest rate hikes to escape demand-driven deflationary traps. Notably, discretionary and commitment policies with deposit taxes / subsidies deliver virtually equivalent welfare gains, rendering time-inconsistent forward guidance schedules unnecessary. We also derive robust and implementable optimal policy rules when the sources of shocks are unknown.

KW - Deposit Tax-Subsidy

KW - Cost Channel

KW - Optimal Policy

KW - Discretion vs. Commitment

KW - Zero Lower Bound

U2 - 10.1016/j.jedc.2024.104956

DO - 10.1016/j.jedc.2024.104956

M3 - Journal article

VL - 168

JO - Journal of Economic Dynamics and Control

JF - Journal of Economic Dynamics and Control

SN - 0165-1889

M1 - 104956

ER -