This paper analyzes the dynamic properties of the Taylor rule with the zero lower bound on the nominal interest rate in an optimizing monetary model with overlapping generations. The main result is that the presence of wealth effects is not sufficient to rule out the possibility of infinite equilibrium paths with decelerating inflation. In particular, the operation of wealth effects does not avoid the occurrence of liquidity traps when the central bank implements a Taylor-type interest-rate feedback rule.

Annicchiarico, B., Piergallini, A., Marini, G. (2007). Wealth effects, the Taylor rule and the liquidity trap.

Wealth effects, the Taylor rule and the liquidity trap

ANNICCHIARICO, BARBARA;
2007-01-01

Abstract

This paper analyzes the dynamic properties of the Taylor rule with the zero lower bound on the nominal interest rate in an optimizing monetary model with overlapping generations. The main result is that the presence of wealth effects is not sufficient to rule out the possibility of infinite equilibrium paths with decelerating inflation. In particular, the operation of wealth effects does not avoid the occurrence of liquidity traps when the central bank implements a Taylor-type interest-rate feedback rule.
2007
Annicchiarico, B., Piergallini, A., Marini, G. (2007). Wealth effects, the Taylor rule and the liquidity trap.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11590/458057
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