Sharing the Burden: Monetary and Fiscal Responses to a World Liquidity Trap

• 成果类型: Article
• 署名作者: Cook, David; Devereux, Michael B.
• 署名单位: Hong Kong University of Science & Technology; University of British Columbia
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.5.3.190
• 发表日期: 2013
• 页码: 190-228
• 关键词: nominal interest-rates; open economies; POLICY; rules

摘要

This paper analyzes optimal policy responses to a global liquidity trap. The key feature of this environment is that relative prices respond perversely. A fall in demand in one country causes an appreciation of its terms of trade, exacerbating the initial shock. At the zero bound, this country cannot counter this shock. Then it may be optimal for the partner country to raise interest rates. The partner may set a positive policy interest rate, even though its natural interest rate is below zero. An optimal policy response requires a mutual interaction between monetary and fiscal policy.