IDEAS home Printed from https://ideas.repec.org/p/bon/boncrc/crctr224_2021_266.html

The Hockey Stick Phillips Curve and the Zero Lower Bound

Author

Listed:
  • Gregor Boehl

  • Philipp Lieberknecht

Abstract

The recently observed disconnect between in ation and economic activity can be ex- plained by the interplay between the zero lower bound (ZLB) and the costs of external financing. In normal times, credit spreads and the nominal interest rate balance out; factor costs dominate firms' marginal costs. When nominal rates are constrained, larger spreads can more than offset the effect of lower factor costs and induce only moderate in ation responses. The Phillips curve is hence at at the ZLB, but features a posi- tive slope in normal times and thus a hockey stick shape. Via this mechanism, forward guidance may induce de ationary effects.

Suggested Citation

  • Gregor Boehl & Philipp Lieberknecht, 2021. "The Hockey Stick Phillips Curve and the Zero Lower Bound," CRC TR 224 Discussion Paper Series crctr224_2021_266, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2021_266
    as

    Download full text from publisher

    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp266
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gregor Boehl & Gavin Goy & Felix Strobel, 2024. "A Structural Investigation of Quantitative Easing," The Review of Economics and Statistics, MIT Press, vol. 106(4), pages 1028-1044, July.
    2. Andrejs Zlobins, 2024. "On the time-varying effects of the ECB’s asset purchases," Empirical Economics, Springer, vol. 66(6), pages 2593-2623, June.
    3. Andrejs Zlobins, 2021. "On the Time-varying Effects of the ECB's Asset Purchases," Working Papers 2021/02, Latvijas Banka.
    4. Boehl, Gregor, 2022. "Efficient solution and computation of models with occasionally binding constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 143(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bon:boncrc:crctr224_2021_266. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CRC Office (email available below). General contact details of provider: https://www.crctr224.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.