Seven faces of "the peril"
AbstractIn this paper the author discusses the possibility that the U.S. economy may become enmeshed in a Japanese-style deflationary outcome within the next several years. To frame the discussion, the author relies on an analysis that emphasizes two possible long-run steady states for the economy: one that is consistent with monetary policy as it has typically been implemented in the United States in recent years and one that is consistent with the low nominal interest rate, deflationary regime observed in Japan during the same period. The data considered seem to be quite consistent with the two steady-state possibilities. The author describes and critiques seven stories that are told in monetary policy circles regarding this analysis and emphasizes two main conclusions: (i) The Federal Open Market Committee's "extended period" language may be increasing the probability of a Japanese-style outcome for the United States and (ii), on balance, the U.S. quantitative easing program offers the best tool to avoid such an outcome.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Federal Reserve Bank of St. Louis in its journal Review.
Volume (Year): (2010)
Issue (Month): Sep ()
Other versions of this item:
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Evans, G.W. & Guse, E. & Honkapohja, S, 2007.
"Liquidity Traps, Learning and Stagnation,"
Cambridge Working Papers in Economics
0732, Faculty of Economics, University of Cambridge.
- George Evans & Eran Guse & Seppo Honkapohja, 2007. "Liquidity Traps, Learning and Stagnation," Kiel Working Papers 1341, Kiel Institute for the World Economy.
- George W. Evans & Eran Guse & Seppo Honkapohja, 2007. "Liquidity Traps, Learning and Stagnation," University of Oregon Economics Department Working Papers 2007-9, University of Oregon Economics Department, revised 05 Jun 2007.
- Evans, George W & Guse, Eran & Honkapohja, Seppo, 2007. "Liquidity Traps, Learning and Stagnation," CEPR Discussion Papers 6355, C.E.P.R. Discussion Papers.
- Eusepi, Stefano, 2007. "Learnability and monetary policy: A global perspective," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1115-1131, May.
- Daniel L. Thornton, 2007. "The lower and upper bounds of the Federal Open Market Committee's long-run inflation objective," Review, Federal Reserve Bank of St. Louis, issue May, pages 183-194.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- On the perils of Taylor rules
by David Andolfatto in MacroMania on 2012-12-28 20:20:00
- Connecting the Academic and Policy Worlds: Interview with James Bullard
by David Andolfatto in MacroMania on 2013-11-25 21:40:00
- William Gavin & Benjamin Keen, 2013.
"U.S. Monetary Policy: A View from Macro Theory,"
Open Economies Review,
Springer, vol. 24(1), pages 33-49, February.
- Daniel L. Thornton, 2010. "Which comes first: inflation or the FOMC's funds rate target?," Economic Synopses, Federal Reserve Bank of St. Louis.
- James Bullard, 2013. "EconomicDynamics Interviews James Bullard on policy and the academic world," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 14(2), November.
- Nathaniel Throckmorton & Benjamin Keen & Alexander Richter & William Gavin, 2013.
"Global Dynamics at the Zero Lower Bound,"
2013 Meeting Papers
839, Society for Economic Dynamics.
- William T. Gavin & Benjamin D. Keen & Alexander W. Richter & Nathaniel A. Throckmorton, 2013. "Global Dynamics at the Zero Lower Bound," Auburn Economics Working Paper Series auwp2013-17, Department of Economics, Auburn University.
- William T. Gavin & Benjamin D. Keen & Alexander Richter & Nathaniel Throckmorton, 2013. "Global dynamics at the zero lower bound," Working Papers 2013-007, Federal Reserve Bank of St. Louis.
- Stephanie Schmitt-Grohé & Martín Uribe, 2010. "Liquidity Traps: An Interest-Rate-Based Exit Strategy," NBER Working Papers 16514, National Bureau of Economic Research, Inc.
- Airaudo, Marco & Zanna, Luis-Felipe, 2012. "Interest rate rules, endogenous cycles, and chaotic dynamics in open economies," Journal of Economic Dynamics and Control, Elsevier, vol. 36(10), pages 1566-1584.
- Bart Hobijn & Colin Gardiner, 2010. "The breadth of disinflation," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue dec6.
- Eric M. Leeper, 2010.
"Monetary Science, Fiscal Alchemy,"
NBER Working Papers
16510, National Bureau of Economic Research, Inc.
- Eric M. Leeper, 2010. "Monetary science, fiscal alchemy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 361-434.
- Cizkowicz, Piotr & Rzonca, Andrzej, 2011. "Interest rates close to zero, post-crisis restructuring and natural interest rate," MPRA Paper 36989, University Library of Munich, Germany.
- Lee C. Spector & Courtenay C. Stone, 2010. "Unlikely Estimates of the Ex Ante Real Interest Rate: Another Dismal Performance from the Dismal Science1," Working Papers 201010, Ball State University, Department of Economics, revised Jan 2011.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao).
If references are entirely missing, you can add them using this form.