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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
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Handle: RePEc:red:sed010:531
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  1. R. Anton Braun & Yuichiro Waki, 2006. "Monetary Policy During Japan'S Lost Decade," The Japanese Economic Review, Japanese Economic Association, vol. 57(2), pages 324-344.
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  8. Douglas H. Joines & R.Anton Braun & Daisuke Ikeda, 2008. "The saving rate in Japan: Why it has fallen and why it will remain low," CARF F-Series CARF-F-117, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
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  13. Gauti Eggertsson, 2010. "The paradox of toil," Staff Reports 433, Federal Reserve Bank of New York.
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  17. Hibiki Ichiue & Yoichi Ueno, 2007. "Equilibrium Interest Rate and the Yield Curve in a Low Interest Rate Environment," Bank of Japan Working Paper Series 07-E-18, Bank of Japan.
  18. Muto, Ichiro, 2007. "Estimating a New Keynesian Phillips Curve with a Corrected Measure of Real Marginal Cost: Evidence in Japan," MPRA Paper 4662, University Library of Munich, Germany.
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