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Conservatism and liquidity traps

Author

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  • Schmidt, Sebastian
  • Nakata, Taisuke

Abstract

In an economy with an occasionally binding zero lower bound (ZLB) constraint, the anticipation of future ZLB episodes creates a trade-off for discretionary central banks between inflation and output stabilization. As a consequence, inflation systematically falls below target even when the policy rate is above zero. Appointing Rogoff JEL Classification: E52, E61

Suggested Citation

  • Schmidt, Sebastian & Nakata, Taisuke, 2015. "Conservatism and liquidity traps," Working Paper Series 1816, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20151816
    Note: 2179645
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    References listed on IDEAS

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    More about this item

    Keywords

    Deflationary Bias; Inflation Conservatism; inflation targeting; Liquidity Traps; zero lower bound;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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