The hockey stick Phillips curve and the zero lower bound
- The recently observed disconnect between inflation and economic activity can be explained by the interplay between the zero lower bound (ZLB) and the costs of external financing. In normal times, credit spreads and the nominal interest rate balance out; factor costs dominate firms' marginal costs. When nominal rates are constrained, larger spreads can more than offset the effect of lower factor costs and induce only moderate inflation responses. The Phillips curve is hence flat at the ZLB, but features a positive slope in normal times and thus a hockey stick shape. Via this mechanism, forward guidance may induce deflationary effects.
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| Author: | Gregor BöhlGND, Philipp Lieberknecht |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-564508 |
| URL: | https://www.imfs-frankfurt.de/fileadmin/user_upload/IMFS_WP/IMFS_WP_153.pdf |
| Parent Title (English): | Working paper series / Institute for Monetary and Financial Stability ; 153 |
| Series (Serial Number): | Working paper series / Institute for Monetary and Financial Stability (153) |
| Publisher: | Johann Wolfgang Goethe-Univ., Inst. for Monetary and Financial Stability |
| Place of publication: | Frankfurt am Main |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2021 |
| Year of first Publication: | 2021 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2021/02/23 |
| Tag: | Disinflation; Financial Frictions; Forward Guidance; Phillips Curve; Zero Lower Bound |
| Issue: | February 17, 2021 |
| Page Number: | 41 |
| Last Page: | 37 |
| HeBIS-PPN: | 476595428 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / Institute for Monetary and Financial Stability (IMFS) | |
| Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
