NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Supply-Side Policies and the Zero Lower Bound

Jesús Fernández-Villaverde, Pablo A. Guerrón-Quintana, Juan Rubio-Ramírez

NBER Working Paper No. 17543
Issued in October 2011
NBER Program(s):   EFG

This paper examines how supply-side policies may play a role in fighting a low aggregate demand that traps an economy at the zero lower bound (ZLB) of nominal interest rates. Future increases in productivity or reductions in mark-ups triggered by supply-side policies generate a wealth effect that pulls current consumption and output up. Since the economy is at the ZLB, increases in the interest rates do not undo this wealth effect, as we will have in the case outside the ZLB. We illustrate this mechanism with a simple two-period New Keynesian model. We discuss possible objections to this set of policies and the relation of supply-side policies with more conventional monetary and fiscal policies.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17543

\Supply-Side Policies and the Zero Lower Bound." Joint with Pablo Guerron (Philadelphia Fed) and Juan F. Rubio-Ramrez (Duke University). IMF Economic Review, forthcoming.

Users who downloaded this paper also downloaded these:
Fernandez-Villaverde, Guerrón-Quintana, Kuester, and Rubio-Ramírez w17317 Fiscal Volatility Shocks and Economic Activity
Fernandez-Villaverde, Gordon, Guerrón-Quintana, and Rubio-Ramírez w18058 Nonlinear Adventures at the Zero Lower Bound
Correia, Farhi, Nicolini, and Teles w16758 Unconventional Fiscal Policy at the Zero Bound
Mankiw and Weinzierl w17029 An Exploration of Optimal Stabilization Policy
Werning w17344 Managing a Liquidity Trap: Monetary and Fiscal Policy
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us