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The zero lower bound (ZLB) or zero nominal lower bound (ZNLB) is a macroeconomic problem that occurs when the short-term nominal interest rate is at or near zero, causing a liquidity trap and limiting the central bank's capacity to stimulate economic growth.
US inflation rates. Zero interest-rate policy (ZIRP) is a macroeconomic concept describing conditions with a very low nominal interest rate, such as those in contemporary Japan and in the United States from December 2008 through December 2015 and again from March 2020 until March 2022 amid the COVID-19 pandemic.
A liquidity trap is a situation, described in Keynesian economics, in which, "after the rate of interest has fallen to a certain level, liquidity preference may become virtually absolute in the sense that almost everyone prefers holding cash rather than holding a debt (financial instrument) which yields so low a rate of interest."
Global Imbalances and Policy Wars at the Zero Lower Bound (with Emmanuel Farhi and Pierre-Olivier Gourinchas) Review of Economic Studies 88.6 (November 2021): 2570–2621 [8] A Model of Endogenous Risk Intolerance and LSAPs: Asset Prices and Aggregate Demand in a "Covid-19" Shock (with Alp Simsek) The Review of Financial Studies 34.11 (November ...
Fischer Black published his paper in 1995 and mentioned that the most recent time that the USA had experienced the zero lower bound was the Great Depression. Shadow rate models got renewed interest with the Financial Crisis of 2007–2008 when interest rates plunged to near zero and, even, below zero in some instances.
This is argued to occur in liquidity trap situations, when interest rates are at a zero lower bound (or near it) and savings still exceed investment demand. Within Keynesian economics, the desire to hold currency rather than loan it out is discussed under liquidity preference.
Lower class, middle class, and upper class are all widely used, but rarely defined terms. For some people, lower class means living in poverty, upper class means a life of luxury, and middle class ...
Schmitt-Grohé's research deviated mainly in its loosening of these local dynamics and its consideration of a zero lower bound on nominal interest rates. The results of their study confirmed the existence of multiple equilibria; one near the targeted inflation rate as was previously identified; as well as a second equilibrium with zero nominal ...