Endogenous forecast switching near the zero lower bound

• 成果类型: Article
• 署名作者: Lansing, Kevin J.
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - San Francisco
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2019.12.003
• 发表日期: 2021
• 关键词: Natural rate of interest; liquidity trap; zero lower bound; Taylor rule; deflation

摘要

A representative agent contemplates the possibility of an occasionally binding zero lower bound (ZLB) on the nominal interest rate that is driven by switching between two local equilibria, labeled the targeted and deflation solutions, respectively. This view turns out to be true in simulations, thus validating the agent's beliefs. I solve for the time series of stochastic shocks and endogenous forecast weights that allow the model to exactly replicate the observed time paths of U.S. data since 1988. The data since the start of the ZLB episode in 2008.Q4 are best described as a time-varying mixture of the two local equilibria. (C) 2019 Elsevier B.V. All rights reserved.