A Simple Treatment of the Liquidity Trap for Intermediate Macroeconomics Courses

Autor/inn/en	Buttet, Sebastien; Roy, Udayan
Titel	A Simple Treatment of the Liquidity Trap for Intermediate Macroeconomics Courses
Quelle	In: Journal of Economic Education, 45 (2014) 1, S.36-55 (20 Seiten)Infoseite zur Zeitschrift PDF als Volltext Verfügbarkeit
Sprache	englisch
Dokumenttyp	gedruckt; online; Zeitschriftenaufsatz
ISSN	0022-0485
DOI	10.1080/00220485.2014.859959
Schlagwörter	Economics Education; Macroeconomics; Financial Policy; Models; Credit (Finance); Undergraduate Study; Textbooks + Suchen Sie Ihr Suchwort? Wirtschaftskunde; Makroökonomie; Fiscal policy; Finanzpolitik; Analogiemodell; Credit; Kredit; Grundstudium; Textbook; Text book; Schulbuch; Lehrbuch
Abstract	Several leading undergraduate intermediate macroeconomics textbooks now include a simple reduced-form New Keynesian model of short-run dynamics (alongside the IS-LM model). Unfortunately, there is no accompanying description of how the zero lower bound on nominal interest rates affects the model. In this article, the authors show how the aforementioned model can easily be modified to teach undergraduate students about the significance of the zero lower bound for economic performance and policy. This acquires additional significance because economies such as the United States and Japan have been close to the zero lower bound since 2008 and 1995, respectively. The authors show that when the zero lower bound is introduced, an additional long-run equilibrium exists. This equilibrium is unstable and can lead to a deflationary spiral. (As Provided).
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Erfasst von	ERIC (Education Resources Information Center), Washington, DC
Update	2017/4/10