The Neo-Fisherianism to Escape Zero Lower Bound
Environmental, Social, and Governance Perspectives on Economic Development in Asia
ISBN: 978-1-80117-595-1, eISBN: 978-1-80117-594-4
Publication date: 8 November 2021
Abstract
Sufficiently persistent rise in nominal interest increases inflation rate in short-run. This short-run comovement of nominal interest rate and inflation rate is known as Neo-Fisherianism. This chapter proposes a policy based on Neo-Fisherianism to escape Zero Lower Bound (ZLB) using a textbook Forward Looking New Keynesian Model. I have shown that proposed policy with properly chosen inflation target and persistence can stimulate economy and escape ZLB by raising nominal interest rate. I have also shown that the proposed policy is robust to varying degrees of price stickiness.
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Acknowledgements
Acknowledgments
I am indebted to Betty C. Daniel, Chetan Ghate, Ashima Goyal, Victoria Hnatkovska and conference participants on DSGE Modeling for Emerging Economies at IGIDR, Mumbai, India for helpful comments and suggestions.
Citation
Chattopadhyay, S. (2021), "The Neo-Fisherianism to Escape Zero Lower Bound", Barnett, W.A. and Sergi, B.S. (Ed.) Environmental, Social, and Governance Perspectives on Economic Development in Asia (International Symposia in Economic Theory and Econometrics, Vol. 29A), Emerald Publishing Limited, Leeds, pp. 1-19. https://doi.org/10.1108/S1571-03862021000029A016
Publisher
:Emerald Publishing Limited
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