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A parsimonious model for zero inflation at the zero lower bound

Author

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  • Takahashi, Yuta
  • Takayama, Naoki

Abstract

Standard monetary models with representative households typically predict sizable deflation at the zero lower bound of interest rates, yet Japan had experienced near-zero inflation. By replacing infinite-lived households with finite-lived ones, we offer a parsimonious resolution under reasonable parameter values.

Suggested Citation

  • Takahashi, Yuta & Takayama, Naoki, 2025. "A parsimonious model for zero inflation at the zero lower bound," Economics Letters, Elsevier, vol. 247(C).
    • Handle: RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176524006189
    DOI: 10.1016/j.econlet.2024.112134
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    More about this item

    Keywords

    Zero lower bound; Deflation; Perpetual youth model;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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