Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/92845 
Year of Publication: 
2009
Series/Report no.: 
ISER Discussion Paper No. 748
Publisher: 
Osaka University, Institute of Social and Economic Research (ISER), Osaka
Abstract: 
We present a dynamic and monetary model that consistently explains such various phenomena as unemployment, deflation, zero nominal interest rates and excess reserves held by commercial banks. These phenomena are commonly observed during the Great Depression in the United States, the recent long-run stagnation in Japan, and the worldwide financial crisis triggered by the US subprime loan problem of 2008. We show that an excessive liquidity preference leads to a liquidity trap and thereby generates the phenomena.
Subjects: 
Liquidity Trap
Zero Nominal Interest Rate
Persistent Unemployment
Excess Reserve
Deflation
JEL: 
E12
E31
E41
E51
Document Type: 
Working Paper

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