American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Uncertainty at the Zero Lower Bound
American Economic Journal: Macroeconomics
(pp. 186–221)
Abstract
When the policy rate is at the zero lower bound (ZLB), an increase in uncertainty regarding the future path of exogenous shocks alters the conditional expectations of relevant prices facing households and firms. Accordingly, an increase in uncertainty alters consumption, inflation, and output to a greater extent when the policy rate is constrained than otherwise. Using an empirically rich sticky-price model calibrated to match key features of the US economy, I find that uncertainty can exacerbate the decline of output by about 10 percent in a deep recession that pushes the policy rate to the ZLB.Citation
Nakata, Taisuke. 2017. "Uncertainty at the Zero Lower Bound." American Economic Journal: Macroeconomics 9 (3): 186–221. DOI: 10.1257/mac.20140253Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E31 Price Level; Inflation; Deflation
- E32 Business Fluctuations; Cycles
- E43 Interest Rates: Determination, Term Structure, and Effects
- E52 Monetary Policy
- E58 Central Banks and Their Policies