Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/195099
Authors: 
Proaño Acosta, Christian
Lojak, Benjamin
Year of Publication: 
2019
Series/Report no.: 
BERG Working Paper Series 148
Abstract: 
In this paper we investigate the risk-related effects of monetary policy both in normal times, as well as in periods where the zero lower bound (ZLB) binds, in a stylized macroeconomic model with boundedly rational beliefs. In our model, financial market participants use heuristics to assess the risk premium over the policy rate in accordance to an "implicit Taylor rule" that measures the stance of conventional monetary policy and which serves as an informative instrument during times when the funds rate is constrained by the ZLB. In such a case, conventional monetary policy is exhausted so that the central bank is forced to use unconventional types of policy. We propose alternative monetary policy measures to help the economy out of the liquidity trap which take into account this assumed form of bounded rationality.
Subjects: 
Behavioral Macroeconomics
Monetary Policy
Zero Lower Bound
Bounded Rationality
ISBN: 
978-3-943153-69-9
Document Type: 
Working Paper

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