Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/148064
Authors: 
Giri, Federico
Riccetti, Luca
Russo, Alberto
Gallegati, Mauro
Year of Publication: 
2016
Series/Report no.: 
FinMaP-Working Paper 65
Abstract: 
An accommodating monetary policy followed by a sudden increase of the short term interest rate often leads to a bubble burst and to an economic slowdown. Two examples are the Great Depression of 1929 and the Great Recession of 2008. Through the implementation of an Agent Based Model with a financial accelerator mechanism we are able to study the relationship between monetary policy and large scale crisis events. The main results can be summarized as follow: a) sudden and sharp increases of the policy rate can generate recessions; b) after a crisis, returning too soon and too quickly to a normal monetary policy regime can generate a \double dip" recession, while c) keeping the short term interest rate anchored to the zero lower bound in the short run can successfully avoid a further slowdown.
Subjects: 
Monetary Policy
Large Crises
Agent Based Model
Financial Accelerator
Zero Lower Bound
JEL: 
E32
E44
E58
C63
Document Type: 
Working Paper

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