BoE paper explores liquidity traps with ‘Hank’ model

Precautionary savings can send economy into deflationary spiral, authors find

bank-of-england

New research published by the Bank of England explores how central banks should respond to a liquidity trap when policy is constrained by the zero lower bound.

Dario Bonciani and Joonseok Oh tackle this question using a heterogeneous-agent New Keynesian (Hank) model, featuring workers and firm owners. The workers face the risk of becoming unemployed, and “incomplete markets” mean they cannot fully insure themselves against this possibility. Firm owners, by contrast, do not face this risk.

The

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@centralbanking.com or view our subscription options here: http://subscriptions.centralbanking.com/subscribe

You are currently unable to copy this content. Please contact info@centralbanking.com to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Central Banking? View our subscription options

Register for Central Banking

All fields are mandatory unless otherwise highlighted

This address will be used to create your account

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Central Banking account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account

.