The euro area recently experienced a prolonged period of weak economic activity and very
low inflation. This paper reviews models of business cycle stabilization with an eye to …

We argue that the government-spending multiplier can be much larger than one when the
zero lower bound on the nominal interest rate binds. The larger the fraction of government …

In this paper, we use a dynamic stochastic general equilibrium model to examine the effects
of an expansion in government spending in a liquidity trap. If the liquidity trap is very …

This paper studies optimal fiscal and monetary policy when the nominal interest rate is
subject to the zero lower bound (ZLB) constraint in a stochastic New Keynesian economy. In …

Liquidity traps can be either fundamental or confidence-driven. In a simple, unified New
Keynesian framework, I provide the analytical condition for the latter's prevalence: enough …

Optimal forward guidance is the simple policy of keeping interest rates low for some
optimally determined number of periods after the liquidity trap ends and moving to normal …

We study optimal time-consistent monetary and fiscal policy in a New Keynesian model
where occasional declines in agents' confidence give rise to persistent liquidity trap …

We study optimal fiscal policy in an economy plunged into a deep recession characterized
by a liquidity trap, and in which the government can allocate spending both to consumption …

We build a medium-scale DSGE model and calibrate it to fit the main macroeconomic
variables during the US Great Recession. Using it to evaluate the welfare effects of …

Structural models used to study monetary policy often include sticky prices. Calvo pricing is
more common but Rotemberg pricing has become popular due to its computational …