Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130667
Authors: 
Campbell, Jeffrey R.
Year of Publication: 
2014
Series/Report no.: 
Working Paper, Federal Reserve Bank of Chicago 2014-15
Abstract: 
This paper considers monetary and fiscal policy when tangible assets can be accumulated after shocks that increase desired savings, like Joseph's biblical prophecy of seven fat years followed by seven lean years. The model's flexible-price allocation mimics Joseph's saving to smooth consumption. With nominal rigidities, monetary policy that eliminates liquidity traps leaves the economy vulnerable to confidence recessions with low consumption and investment. Josephean Quantitative Easing, a fiscal policy that purchases either obligations collateralized by tangible assets or the assets themselves, eliminates both liquidity traps and confidence recessions by putting a floor under future consumption. This requires no commitment to a time-inconsistent plan.
Subjects: 
Zero Lower Bound
Liquidity Trap
Confidence Recession
Storage
Equilibrium Multiplicity
Competitive Devaluation
JEL: 
E12
E63
Document Type: 
Working Paper

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