NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Nonlinear Adventures at the Zero Lower Bound

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

NBER Working Paper No. 18058
Issued in May 2012
NBER Program(s):   EFG

Motivated by the recent experience of the U.S. and the Eurozone, we describe the quantitative properties of a New Keynesian model with a zero lower bound (ZLB) on nominal interest rates, explicitly accounting for the nonlinearities that the bound brings. Besides showing how such a model can be efficiently computed, we find that the behavior of the economy is substantially affected by the presence of the ZLB. In particular, we document 1) the unconditional and conditional probabilities of hitting the ZLB; 2) the unconditional and conditional probabilty distributions of the duration of a spell at the ZLB; 3) the responses of output to government expenditure shocks at the ZLB, 4) the distribution of shocks that send the economy to the ZLB; and 5) the distribution of shocks that keep the economy at the ZLB.

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:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18058

Users who downloaded this paper also downloaded these:
Bianchi, Boz, and Mendoza w18036 Macro-Prudential Policy in a Fisherian model of Financial Innovation
Aruoba, Cuba-Borda, and Schorfheide w19248 Macroeconomic Dynamics Near the ZLB: A Tale of Two Countries
Wei and Frankel w3910 Are Option-Implied Forecasts of Exchange Rate Volatility Excessively Variable?
Fernández-Villaverde, Guerrón-Quintana, and Rubio-Ramírez w17543 Supply-Side Policies and the Zero Lower Bound
Andreasen, Fernández-Villaverde, and Rubio-Ramírez w18983 The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

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

Contact Us