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    Real rigidities and optimal stabilization at the Zero Lower Bound in New Keynesian economies

    Belgibayeva, Adiya and Horvath, M. (2017) Real rigidities and optimal stabilization at the Zero Lower Bound in New Keynesian economies. Working Paper. Birkbeck College, University of London, London, UK.

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    Abstract

    The paper re-visits the literature on real rigidities in New Keynesian models in the context of an economy at the zero lower bound. It identifies strategic interaction among price- and wage-setting agents in the economy as an important determinant of both optimal policy and economic dynamics in deep recessions. In particular, labour market segmentation is shown to have a significant influence on the length of the forward commitment to keep interest rates at zero, the magnitude of the fiscal policy responses as well as inflation volatility in the economy under optimal policy.

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: ISSN 1745-8587: BWPEF 1701
    Keyword(s) / Subject(s): zero lower bound, strategic complementarity, labour market, inflation, income tax, government spending.
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 04 Jul 2017 10:25
    Last Modified: 04 Jul 2017 10:25
    URI: http://eprints.bbk.ac.uk/id/eprint/19114

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