In a recent blog post, Paul Krugman writes:
This is belike a truthful statement. It is non that other books don't encompass the topic, however. It is simply that Paul Krugman doesn't know it.
FYI, hither is what the leading introductory text says close the topic:
Other economists are skeptical close the relevance of liquidity traps in addition to believe that a fundamental banking concern continues to accept tools to expand the economy, fifty-fifty afterward its involvement charge per unit of measurement target hits its lower jump of zero. One possibility is that the fundamental banking concern could enhance inflation expectations yesteryear committing itself to futurity monetary expansion. Even if nominal involvement rates cannot autumn whatsoever further, higher expected inflation tin lower existent involvement rates yesteryear making them negative, which would receive investment spending.
H5N1 minute possibility is that the fundamental banking concern could comport expansionary open-market operations amongst a larger diversity of fiscal instruments than it ordinarily uses. For example, it could purchase mortgages in addition to corporate debt in addition to thereby lower the involvement rates on these kinds of loans. The Federal Reserve actively pursued this terminal selection during the downturn of 2008 in addition to 2009.
Some economists accept suggested that the possibility of hitting the zip lower jump for involvement rates justifies setting the target charge per unit of measurement of inflation good to a higher house zero. Under zip inflation, the existent involvement rate, similar the nominal interest, tin never autumn below zero. But if the normal charge per unit of measurement of inflation is, say, four percent, in addition to hence the fundamental banking concern tin easily force the existent involvement charge per unit of measurement to negative four pct yesteryear lowering the nominal involvement charge per unit of measurement toward zero. Thus, moderate inflation gives monetary policymakers to a greater extent than room to receive the economic scheme when needed, reducing the take away chances of hitting upward against the zip lower jump in addition to having the economic scheme autumn into a liquidity trap. Sumber https://gregmankiw.blogspot.com/
As far equally I know, amid basic textbooks alone Krugman/Wells fifty-fifty talks close the liquidity trap.
This is belike a truthful statement. It is non that other books don't encompass the topic, however. It is simply that Paul Krugman doesn't know it.
FYI, hither is what the leading introductory text says close the topic:
The Zero Lower Bound
As nosotros accept simply seen, monetary policy plant through involvement rates. This determination raises a question: What if the Fed’s target involvement charge per unit of measurement has fallen equally far equally it can? In the recession of 2008 in addition to 2009, the federal funds charge per unit of measurement cruel to close zero. What, if anything, tin monetary policy practice in addition to hence to receive the economy?
Some economists depict this province of affairs equally a liquidity trap. According to the theory of liquidity preference, expansionary monetary policy plant yesteryear reducing involvement rates in addition to stimulating investment spending. But if involvement rates accept already fallen almost to zero, in addition to hence maybe monetary policy is no longer effective. Nominal involvement rates cannot autumn below zero: Rather than making a loan at a negative nominal involvement rate, a soul would simply concord cash. In this environment, expansionary monetary policy raises the render of money, making the public’s property portfolio to a greater extent than liquid, but because involvement rates can't autumn whatsoever further, the extra liquidity powerfulness non accept whatsoever effect. Aggregate demand, production, in addition to work may endure "trapped" at depression levels.
Other economists are skeptical close the relevance of liquidity traps in addition to believe that a fundamental banking concern continues to accept tools to expand the economy, fifty-fifty afterward its involvement charge per unit of measurement target hits its lower jump of zero. One possibility is that the fundamental banking concern could enhance inflation expectations yesteryear committing itself to futurity monetary expansion. Even if nominal involvement rates cannot autumn whatsoever further, higher expected inflation tin lower existent involvement rates yesteryear making them negative, which would receive investment spending.
H5N1 minute possibility is that the fundamental banking concern could comport expansionary open-market operations amongst a larger diversity of fiscal instruments than it ordinarily uses. For example, it could purchase mortgages in addition to corporate debt in addition to thereby lower the involvement rates on these kinds of loans. The Federal Reserve actively pursued this terminal selection during the downturn of 2008 in addition to 2009.
Some economists accept suggested that the possibility of hitting the zip lower jump for involvement rates justifies setting the target charge per unit of measurement of inflation good to a higher house zero. Under zip inflation, the existent involvement rate, similar the nominal interest, tin never autumn below zero. But if the normal charge per unit of measurement of inflation is, say, four percent, in addition to hence the fundamental banking concern tin easily force the existent involvement charge per unit of measurement to negative four pct yesteryear lowering the nominal involvement charge per unit of measurement toward zero. Thus, moderate inflation gives monetary policymakers to a greater extent than room to receive the economic scheme when needed, reducing the take away chances of hitting upward against the zip lower jump in addition to having the economic scheme autumn into a liquidity trap. Sumber https://gregmankiw.blogspot.com/
