The Stochastic Lower Bound

Riccardo Maria Masolo; P. E. Winant

doi:10.1016/j.econlet.2019.03.026

The Stochastic Lower Bound

Riccardo Maria Masolo^*
, P. E. Winant

^*Corresponding author

Research output: Contribution to journal › Article

Abstract

Since the Great Recession policy rates have been extremely low, but neither absolutely constant, nor\r\nexactly set to zero. We thus augment a standard Zero Lower Bound (ZLB) model to study the effects\r\nof a Stochastic Lower Bound (SLB) on policy rates. We find that a less predictable SLB reduces the\r\ndeflationary effects of negative demand shocks by lowering expectations of future values of the SLB\r\nat times when interest-rate cuts are not an option.

Original language	English
Pages (from-to)	54-57
Number of pages	4
Journal	Economics Letters
Volume	180
Issue number	July
DOIs	https://doi.org/10.1016/j.econlet.2019.03.026
Publication status	Published - 2019

All Science Journal Classification (ASJC) codes

Finance
Economics and Econometrics

Keywords

DSGE
Inflation
ZLB

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10.1016/j.econlet.2019.03.026

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title = "The Stochastic Lower Bound",

abstract = "Since the Great Recession policy rates have been extremely low, but neither absolutely constant, nor\textbackslash{}r\textbackslash{}nexactly set to zero. We thus augment a standard Zero Lower Bound (ZLB) model to study the effects\textbackslash{}r\textbackslash{}nof a Stochastic Lower Bound (SLB) on policy rates. We find that a less predictable SLB reduces the\textbackslash{}r\textbackslash{}ndeflationary effects of negative demand shocks by lowering expectations of future values of the SLB\textbackslash{}r\textbackslash{}nat times when interest-rate cuts are not an option.",

keywords = "DSGE, Inflation, ZLB, DSGE, Inflation, ZLB",

author = "Masolo, \{Riccardo Maria\} and Winant, \{P. E.\}",

year = "2019",

doi = "10.1016/j.econlet.2019.03.026",

language = "English",

volume = "180",

pages = "54--57",

journal = "Economics Letters",

issn = "0165-1765",

publisher = "Elsevier B.V.",

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T1 - The Stochastic Lower Bound

AU - Masolo, Riccardo Maria

AU - Winant, P. E.

PY - 2019

Y1 - 2019

N2 - Since the Great Recession policy rates have been extremely low, but neither absolutely constant, nor\r\nexactly set to zero. We thus augment a standard Zero Lower Bound (ZLB) model to study the effects\r\nof a Stochastic Lower Bound (SLB) on policy rates. We find that a less predictable SLB reduces the\r\ndeflationary effects of negative demand shocks by lowering expectations of future values of the SLB\r\nat times when interest-rate cuts are not an option.

AB - Since the Great Recession policy rates have been extremely low, but neither absolutely constant, nor\r\nexactly set to zero. We thus augment a standard Zero Lower Bound (ZLB) model to study the effects\r\nof a Stochastic Lower Bound (SLB) on policy rates. We find that a less predictable SLB reduces the\r\ndeflationary effects of negative demand shocks by lowering expectations of future values of the SLB\r\nat times when interest-rate cuts are not an option.

KW - DSGE

KW - Inflation

KW - ZLB

KW - DSGE

KW - Inflation

KW - ZLB

UR - https://publicatt.unicatt.it/handle/10807/227841

UR - https://www.scopus.com/inward/citedby.uri?partnerID=HzOxMe3b&scp=85064319762&origin=inward

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DO - 10.1016/j.econlet.2019.03.026

M3 - Article

SN - 0165-1765

VL - 180

SP - 54

EP - 57

JO - Economics Letters

JF - Economics Letters

IS - July

ER -

The Stochastic Lower Bound

Abstract

All Science Journal Classification (ASJC) codes

Keywords

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