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Noritaka Kudoh
 
''A global analysis of liquidity effects, interest rate rules, and deflationary traps''
( 2009, Vol. 29 No.2 )
 
 
The prevailing models of liquidity traps suggest that a deflationary trap is a stable steady state in a multiple equilibria model. These models implicitly assume that the central bank accelerates the process of disinflation by following a Taylor rule even though there is a long run positive relationship between the nominal interest rate and inflation rate. This paper presents a reduced-form model that integrates liquidity effects into the analysis of interest rate rules to generalize the previous results about uniqueness, determinacy, and dynamic property of the economy.
 
 
Keywords: Taylor rules, liquidity effects, liquidity traps, deflation.
JEL: E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
E4 - Money and Interest Rates: General
 
Manuscript Received : Apr 27 2009 Manuscript Accepted : Jun 28 2009

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