Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
I study the long run determinacy tradeoff–recurrent episodes of passive monetary policy are (in)determinate if their expected duration is long (brief)–when passive policy is at the zero bound. On-going regime change implies qualitatively different shock transmission from the standard New Keynesian model. For US baseline parameter values, I find temporary fiscal stimulus is effective, while adverse supply shocks can be expansionary if the central bank’s active policy stance is weak and/or if the liquidity trap’s average duration exceeds 3 quarters.