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Author
Brzoza-Brzezina Michał (Warsaw School of Economics, Poland)
Title
Why may large economies suffer more at the zero lower bound?
Source
Collegium of Economic Analysis SGH - Working Papers, 2016, nr 12, 18 s., rys., wykr., tab., bibliogr. 20 poz.
Keyword
Gospodarka otwarta, Stopa procentowa, Strategia banku centralnego, Ryzyko stopy procentowej
Open economy, Interest rate, Central bank strategy, Interest rate risk
Note
summ.
Abstract
This paper compares the consequences of hitting the zero lower bound in small open and large closed economies. I costruct a two-economy New Kenynesian model and calibrate it so that one economy is small and open and the second large and closed. Then I conduct a number of experiments assuming that the zero lower bound binds for one or the other economy. At the ZLB bad shocks are amplified and good shocks dampened. I show that these modifications are much stronger in the large than in the small economy. As a result the large economy may suffer more at the ZLB. (original abstract)
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Bibliography
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Language
eng
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