>

LS,

> Nikolaos Panigirtzglou and I have just finished a very thorough
> rewrite of our earlier paper on liquidity traps "Liquidity Traps: How
> to Avoid Them and How to Escape Them". This new paper incorporates a
> number of improvements over the old one. First, it is half the
> length. Second, the global characterisation (algebraically and
> diagrammatically) of the dynamics is correct rather than close but no
> sigar. Third, we go beyond the earlier paper by showing how liquidity
> traps can be eliminated completely by augmenting a conventional Taylor
> rule for the short nominal interest rate on non-monetary securities
> with a simple rule for taxing non-interest-bearing monetary assets
> (currency). Taxing money (paying a negative nominal interest rate on
> currency) can eliminate the zero nominal interest rate floor for
> non-monetary securities, an idea going back at least to Gesell.
>
> For a link to the paper "Liquidity Traps; Gesell's Solution", click
> http://www.nber.org/~wbuiter/gesell.pdf
>
> For the Figures, click
> http://www.nber.org/~wbuiter/liqpic.pdf
>
>
>
> Willem H. Buiter
>
>

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