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New Keynesian Dynamics in a Low Interest Rate Environment

  • Lena Mareen Koerber

    (German Institute for Economic Research)

  • R. Anton Braun

    (University of Tokyo)

Recent research has found that the dynamics of the New Keynesian model are very different when the nominal interest rate is zero. Positive technology shocks and negative shocks to the labor tax rate lower economic activity and the size of the government purchase multiplier can be as large as four. We consider the empirical relevance of these dynamics using Japanese data. We find that the New Keynesian model exhibits orthodox dynamics and the size of the government purchase multiplier is less than one in Japan.

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Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 531.

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Date of creation: 2010
Date of revision:
Handle: RePEc:red:sed010:531
Contact details of provider: Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA
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