We study optimal monetary policy at the zero lower bound in a model where the central bank
can deploy forward guidance and balance-sheet policies. A welfare-maximising monetary …

When the economy is in a liquidity trap and households have a precautionary motive to save
against unemployment risk, adverse demand shocks cause severe deflationary spirals and …

Abstract Standard New Keynesian models deliver puzzling results at the effective lower
bound of short-term interest rates: greater price flexibility amplifies the fall in the output gap …

New Keynesian models generate puzzles when confronted with the zero lower bound (ZLB)
on nominal interest rates (eg the forward guidance puzzle or the paradox of flexibility). We …