Scholarlink

<p>We study the role of agents’ limited cognitive capabilities, combined with fiscal and monetary policies, in the generation of a deflationary trap. In order to do so, we employ a heterogeneous expectations New Keynesian model in which the agents’ forecasts are based on simple heuristics. Thanks to a learning mechanism, the model is able to generate endogenous changes in agents’ beliefs that we prove to have a crucial role in the characterization of a deflationary trap. We show that the probability of hitting the zero lower bound on the interest rate, and potentially entering a deflationary trap, is not only affected by the inflation target set by the central bank. This probability is also influenced by the governments’ focus on public debt stabilization and by the agents’ memory and willingness to learn. We also show that the impact of these factors is very significant for inflation targets in the range 0–3%, while an inflation target of <InlineEquation ID="IEq1"> <InlineMediaObject> <ImageObject Color="BlackWhite" FileRef="199_2025_1643_Article_IEq1.gif" Format="GIF" Height="16" Rendition="HTML" Resolution="72" Type="Linedraw" Width="23" /> </InlineMediaObject> <EquationSource Format="TEX">\(4\%\)</EquationSource> <EquationSource Format="MATHML"><math> <mrow> <mn>4</mn> <mo>%</mo> </mrow> </math></EquationSource> </InlineEquation> isolates the system from the zero lower bound problem.</p>

错误：搜索内容不能为空，请输入英文关键词
错误：关键词超出字数限制，请精简
高级检索

Deflationary traps, agents’ beliefs and fiscal–monetary policies

  • 期刊论文

  • 出版模式：

    开放获取

  • 发表日期：

    2025年4月9日

查看全文
  • Paul De Grauwe,
  • Pasquale Foresti

摘要

We study the role of agents’ limited cognitive capabilities, combined with fiscal and monetary policies, in the generation of a deflationary trap. In order to do so, we employ a heterogeneous expectations New Keynesian model in which the agents’ forecasts are based on simple heuristics. Thanks to a learning mechanism, the model is able to generate endogenous changes in agents’ beliefs that we prove to have a crucial role in the characterization of a deflationary trap. We show that the probability of hitting the zero lower bound on the interest rate, and potentially entering a deflationary trap, is not only affected by the inflation target set by the central bank. This probability is also influenced by the governments’ focus on public debt stabilization and by the agents’ memory and willingness to learn. We also show that the impact of these factors is very significant for inflation targets in the range 0–3%, while an inflation target of \(4\%\) 4 % isolates the system from the zero lower bound problem.