Nonlinear Adventures at the Zero Lower Bound

@inproceedings{FernndezVillaverde2012NonlinearAA,
  title={Nonlinear Adventures at the Zero Lower Bound},
  author={Jes{\'u}s Fern{\'a}ndez-Villaverde and Grey Gordon and Pablo Guerron-Quintana and Juan Francisco Rubio-Ramirez},
  year={2012}
}
Motivated by the recent experience of the U.S. and the Eurozone, we describe the quantitative properties of a New Keynesian model with a zero lower bound (ZLB) on nominal interest rates, explicitly accounting for the nonlinearities that the bound brings. Besides showing how such a model can be efficiently computed, we find that the behavior of the economy is substantially affected by the presence of the ZLB. In particular, we document 1) the unconditional and conditional probabilities of… CONTINUE READING

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