scholarly journals TAX RULES TO PREVENT EXPECTATIONS-DRIVEN LIQUIDITY TRAPS

2021 ◽  
pp. 1-24
Author(s):  
Yoichiro Tamanyu
Keyword(s):  
Lower Bound ◽  
Government Spending ◽  
Multiple Equilibria ◽  
Sufficient Conditions ◽  
New Keynesian ◽  
Inflation Expectations ◽  
Liquidity Trap ◽  
Tax Rate ◽  
New Keynesian Models ◽  
Necessary And Sufficient

Multiple equilibria arise in standard New Keynesian models when the nominal interest rate is set according to the Taylor rule and constrained by a zero lower bound (ZLB). One of these equilibria is deflationary and referred to as an expectations-driven liquidity trap (ELT) as it arises because of the de-anchoring of inflation expectations. This study demonstrates that a simple tax rule responding to inflation can prevent a liquidity trap from arising without increasing government spending or debt. We analytically investigate the necessary and sufficient conditions to prevent an ELT and show that both the frequency and persistence of ELT episodes affect the extent to which the tax rule must respond to inflation. In brief, the higher the frequency or the longer the persistence of the ELT, the greater the response of the tax rate must be.

scholarly journals THE EFFECTS OF FISCAL POLICY AT THE EFFECTIVE LOWER BOUND

2020 ◽  
pp. 1-37 ◽  
Author(s):  
Dennis Bonam ◽  
Jakob De Haan ◽  
Beau Soederhuizen
Keyword(s):  
Lower Bound ◽  
Interest Rates ◽  
Government Spending ◽  
New Keynesian ◽  
Panel Var ◽  
Government Investment ◽  
Time To Build ◽  
Low Interest Rates ◽  
New Keynesian Models ◽  
The Government

We estimate the effects of government spending shocks during prolonged episodes of low interest rates, which we consider as proxy for the effective lower bound (ELB). Using a panel VAR model for 17 advanced countries, we find that both the government consumption and investment multipliers are significantly higher, and exceed unity, when interest rates are persistently low. Distinguishing between construction- and equipment-related government investments, we find that only the former raises output by significantly more when the ELB binds. This result can be explained by existing New Keynesian models featuring time-to-build constraints on government investment.

On the factorable spaces of absolutely p-summable, null, convergent, and bounded sequences

2021 ◽  
Vol 71 (6) ◽  
pp. 1375-1400
Author(s):  
Feyzi Başar ◽  
Hadi Roopaei
Keyword(s):  
Lower Bound ◽  
Sequence Space ◽  
Sufficient Conditions ◽  
Necessary And Sufficient Conditions ◽  
Matrix Transformations ◽  
Infinite Matrix ◽  
The Matrix ◽  
Alpha Beta ◽  
Necessary And Sufficient ◽  
Bounded Sequences

Abstract Let F denote the factorable matrix and X ∈ {ℓp , c 0, c, ℓ ∞}. In this study, we introduce the domains X(F) of the factorable matrix in the spaces X. Also, we give the bases and determine the alpha-, beta- and gamma-duals of the spaces X(F). We obtain the necessary and sufficient conditions on an infinite matrix belonging to the classes (ℓ p (F), ℓ ∞), (ℓ p (F), f) and (X, Y(F)) of matrix transformations, where Y denotes any given sequence space. Furthermore, we give the necessary and sufficient conditions for factorizing an operator based on the matrix F and derive two factorizations for the Cesàro and Hilbert matrices based on the Gamma matrix. Additionally, we investigate the norm of operators on the domain of the matrix F. Finally, we find the norm of Hilbert operators on some sequence spaces and deal with the lower bound of operators on the domain of the factorable matrix.

scholarly journals Resolving New Keynesian Anomalies with Wealth in the Utility Function

2019 ◽  
pp. 1-46 ◽  
Author(s):  
Pascal Michaillat ◽  
Emmanuel Saez
Keyword(s):  
Lower Bound ◽  
Utility Function ◽  
Social Status ◽  
Government Spending ◽  
Marginal Utility ◽  
New Keynesian ◽  
Zero Lower Bound ◽  
Forward Guidance ◽  
Keynesian Model ◽  
Low Levels

At the zero lower bound, the New Keynesian model predicts that output and inflation collapse to implausibly low levels, and that government spending and forward guidance have implausibly large effects. To resolve these anomalies, we introduce wealth into the utility function; the justification is that wealth is a marker of social status, and people value status. Since people partly save to accrue social status, the Euler equation is modified. As a result, when the marginal utility of wealth is sufficiently large, the dynamical system representing the zero-lower-bound equilibrium transforms from a saddle to a source—which resolves all the anomalies.

scholarly journals REAL RIGIDITIES AND OPTIMAL STABILIZATION AT THE ZERO LOWER BOUND IN NEW KEYNESIAN ECONOMIES

2017 ◽  
Vol 23 (4) ◽  
pp. 1371-1400 ◽  
Author(s):  
Adiya Belgibayeva ◽  
Michal Horvath
Keyword(s):  
Lower Bound ◽  
Interest Rates ◽  
Optimal Policy ◽  
New Keynesian ◽  
Zero Lower Bound ◽  
Wage Setting ◽  
Optimal Stabilization ◽  
Labor Market Segmentation ◽  
Policy Responses ◽  
New Keynesian Models

The paper revisits 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, labor 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.

Weighted Simplex Procedures for Determining Boundary Points and Constants for the Univariate and Multivariate Power Methods

2000 ◽  
Vol 25 (4) ◽  
pp. 417-436 ◽  
Author(s):  
Todd C. Headrick ◽  
Shlomo S. Sawilowsky
Keyword(s):  
Standard Deviation ◽  
Lower Bound ◽  
Lagrange Multiplier ◽  
Sufficient Conditions ◽  
Efficient Algorithms ◽  
Data Sets ◽  
Transformation Techniques ◽  
Normal Distributions ◽  
Nonnormal Distributions ◽  
Necessary And Sufficient

The power methods are simple and efficient algorithms used to generate either univariate or multivariate nonnormal distributions with specified values of (marginal) mean, standard deviation, skew, and kurtosis. The power methods are bounded as are other transformation techniques. Given an exogenous value of skew, there is an associated lower bound of kurtosis. Previous approximations of the boundary for the power methods are either incorrect or inadequate. Data sets from education and psychology can be found to lie within, near, or outside tile boundary of the power methods. In view of this, we derived necessary and sufficient conditions using the Lagrange multiplier method to determine the boundary of the power methods. The conditions for locating and classifying modes for distributions on the boundary were also derived. Self-contained interactive Fortran programs using a Weighted Simplex Procedure were employed to generate tabled values of minimum kurtosis for a given value of skew and power constants for various (non)normal distributions.

scholarly journals Lower Bound of Sectional Curvature of Manifold of Beta Distributions and Complete Monotonicity of Functions Involving Polygamma Functions

2020 ◽  
Author(s):  
Feng Qi
Keyword(s):  
Lower Bound ◽  
Sectional Curvature ◽  
Sufficient Conditions ◽  
Laplace Transforms ◽  
Complete Monotonicity ◽  
Convolution Theorem ◽  
Open Problems ◽  
Polygamma Functions ◽  
Beta Distributions ◽  
Necessary And Sufficient

In the paper, by convolution theorem for the Laplace transforms and analytic techniques, the author finds necessary and sufficient conditions for complete monotonicity, monotonicity, and inequalities of several functions involving polygamma functions. By these results, the author derives a lower bound of a function related to the sectional curvature of the manifold of the beta distributions. Finally, the author poses several guesses and open problems related to monotonicity, complete monotonicity, and inequalities of several functions involving polygamma functions.

scholarly journals What to Expect from the Lower Bound on Interest Rates: Evidence from Derivatives Prices

2021 ◽  
Vol 111 (8) ◽  
pp. 2473-2505
Author(s):  
Thomas M. Mertens ◽  
John C. Williams
Keyword(s):  
Lower Bound ◽  
Interest Rates ◽  
New Keynesian ◽  
New Keynesian Model ◽  
Liquidity Trap ◽  
Keynesian Model ◽  
Two Equilibria

This paper analyzes the effects of the lower bound for interest rates on the distributions of inflation and interest rates. In a New Keynesian model with a lower bound, two equilibria emerge: policy is mostly unconstrained in the “target equilibrium,” whereas policy is mostly constrained in the “liquidity trap equilibrium.” Using options data on interest rates and inflation, we find forecast densities consistent with the target equilibrium and find no evidence in favor of the liquidity trap equilibrium. The lower bound has a sizable effect on the distribution of interest rates, but its impact on inflation is relatively modest. (JEL E12, E23, E31, E43, E52, G13)

A Network-Flow Feasibility Theorem and Combinatorial Applications

1959 ◽  
Vol 11 ◽  
pp. 440-451 ◽  
Author(s):  
D. R. Fulkerson
Keyword(s):  
Lower Bound ◽  
Upper Bound ◽  
Network Flow ◽  
Present Author ◽  
Sufficient Conditions ◽  
Necessary And Sufficient Conditions ◽  
Private Communication ◽  
Circulatory Flow ◽  
Necessary And Sufficient ◽  
Circulation Theorem

There are a number of interesting theorems, relative to capacitated networks, that give necessary and sufficient conditions for the existence of flows satisfying constraints of various kinds. Typical of these are the supply-demand theorem due to Gale (4), which states a condition for the existence of a flow satisfying demands at certain nodes from supplies at other nodes, and the Hoffman circulation theorem (received by the present author in private communication), which states a condition for the existence of a circulatory flow in a network in which each arc has associated with it not only an upper bound for the arc flow, but a lower bound as well. If the constraints on flows are integral (for example, if the bounds on arc flows for the circulation theorem are integers), it is also true that integral flows meeting the requirements exist provided any flow does so.

scholarly journals Identification of games of incomplete information with multiple equilibria and unobserved heterogeneity

10.3982/qe666 ◽  
2019 ◽  
Vol 10 (4) ◽  
pp. 1659-1701 ◽  
Author(s):  
Victor Aguirregabiria ◽  
Pedro Mira
Keyword(s):  
Private Information ◽  
Multiple Equilibria ◽  
Unobserved Heterogeneity ◽  
Common Knowledge ◽  
Sufficient Conditions ◽  
Finite Mixture Model ◽  
Payoff Function ◽  
Finite Mixture ◽  
Relevant Variables ◽  
Necessary And Sufficient

This paper deals with identification of discrete games of incomplete information when we allow for three types of unobservables: payoff‐relevant variables, both players' private information and common knowledge, and nonpayoff‐relevant variables that determine the selection between multiple equilibria. The specification of the payoff function and the distributions of the common knowledge unobservables is nonparametric with finite support (i.e., finite mixture model). We provide necessary and sufficient conditions for the identification of all the primitives of the model. Two types of conditions play a key role in our identification results: independence between players' private information, and an exclusion restriction in the payoff function. When using a sequential identification approach, we find that the up‐to‐label‐swapping identification of the finite mixture model in the first step creates a problem in the identification of the payoff function in the second step: unobserved types have to be correctly matched across different values of observable explanatory variables. We show that this matching‐type problem appears in the sequential estimation of other structural models with nonparametric finite mixtures. We derive necessary and sufficient conditions for identification, and show that additive separability of unobserved heterogeneity in the payoff function is a sufficient condition to deal with this problem. We also compare sequential and joint identification approaches.

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