Liquidity Trap and Excessive Leverage

We investigate the role of macroprudential policies in mitigating liquidity traps. When constrained households engage in deleveraging, the interest rate needs to fall to induce unconstrained households to pick up the decline in aggregate demand. If the fall in the interest rate is limited by the zer...

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Bibliographic Details
Published in:The American economic review 2016-03, Vol.106 (3), p.699-738
Main Authors: Korinek, Anton, Simsek, Alp
Format: Article
Language:English
Subjects:
Aggregate demand
Borrowing
Central banks
Demand
Economic conditions
Externality
Federal Reserve monetary policy
Households
Housing prices
Insurance
Interest rates
Leverage
Liquidity
Meetings
Propensity to consume
Recessions
Regulation of financial institutions
Scholarships & fellowships
Studies
Subsidies
Welfare
Welfare economics
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