zero lower bound

The effects of foreign shocks when interest rates are at zero

JEL codes: 
F32, F41
Version Date: 
Aug 2010

In a two-country DSGE model, the effects of foreign demand shocks on the home country are greatly amplified if the home economy is constrained by the zero lower bound for policy interest rates. This result applies even to countries that are relatively closed to trade such as the United States.

Report file: 
PDF icon Download the paper (375.75 KB)