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Export shocks and the zero bound trap

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  • Ippei Fujiwara

Abstract

When a small open economy experiences a sufficiently large negative export shock, it is vulnerable to falling into a zero bound trap. In addition, such a shock can have very large impact on the economy compared to the case when the zero bound is not a binding constraint. This could be one possible explanation as to why a country like Japan experienced much larger drop in output than the United States during the recent financial crisis.

Suggested Citation

  • Ippei Fujiwara, 2010. "Export shocks and the zero bound trap," Globalization Institute Working Papers 63, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddgw:63
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    File URL: http://dallasfed.org/assets/documents/institute/wpapers/2010/0063.pdf
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    References listed on IDEAS

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    Cited by:

    1. Vadym Lepetyuk & Lilia Maliar & Serguei Maliar, 2017. "Should Central Banks Worry About Nonlinearities of their Large-Scale Macroeconomic Models?," Staff Working Papers 17-21, Bank of Canada.
    2. Lepetyuk, Vadym & Maliar, Lilia & Maliar, Serguei, 2020. "When the U.S. catches a cold, Canada sneezes: A lower-bound tale told by deep learning," Journal of Economic Dynamics and Control, Elsevier, vol. 117(C).

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