Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208226
Authors: 
Nakata, Taisuke
Schmidt, Sebastian
Yoo, Paul
Year of Publication: 
2018
Series/Report no.: 
ECB Working Paper 2192
Abstract: 
The zero lower bound (ZLB) constraint on interest rates makes speed limit policies (SLPs) - policies aimed at stabilizing output growth - less effective. Away from the ZLB, the history dependence induced by a concern for output growth stabilization improves the inflation-output tradeoff for a discretionary central bank. However, in the aftermath of a deep recession with a binding ZLB, a central bank with an objective for output growth stabilization aims to engineer a more gradual increase in output than under the standard discretionary policy. The anticipation of a more restrained recovery exacerbates the declines in inflation and output when the lower bound is binding.
Subjects: 
Liquidity Traps
Markov-Perfect Equilibrium
Speed Limit Policy
Zero Lower Bound
JEL: 
E52
E61
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3297-4
Document Type: 
Working Paper

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