Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/244597 
Year of Publication: 
2019
Series/Report no.: 
Working Paper No. 329
Publisher: 
University of California, Department of Economics, Davis, CA
Abstract: 
We theoretically explore long-run stagnation at the zero lower bound in a representative agent framework. We analytically compare expectations-driven stagnation to a secular stagnation episode and find contrasting policy implications for changes in government spending, supply shocks and neo-Fisherian policies. On the other hand, a minimum wage policy is expansionary and robust to the source of stagnation. Using Bayesian methods, we estimate a DSGE model that can accommodate two competing hypotheses of long-run stagnation in Japan. We document that equilibrium selection under indeterminacy matters in accounting for model fit.
Subjects: 
Expectations-driven trap
secular stagnation
inflation expectations
zero lower bound.
JEL: 
E31
E32
E52
Document Type: 
Working Paper

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