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UCLouvain Economics Seminar - Sebastian Schmidt, ECB
By UCLouvain Economics Seminar

Sebastian Schmidt

European Central Bank

will give a presentation on

Expectations-driven liquidity traps: Implications for monetary and fiscal policy


We study optimal time-consistent monetary and fiscal policy in a New Keynesian model where occasional declines in agents' confidence give rise to persistent liquidity trap episodes. Insights from widely-studied fundamental-driven liquidity traps are not a useful guide for enhancing welfare in this model. Raising the inflation target, appointing an inflation-conservative central banker, or allowing for the use of government spending as an additional stabilization tool can exacerbate deflationary pressures and demand deficiencies during the liquidity trap episodes. However, appointing a policymaker who is sufficiently less concerned with government spending stabilization than society eliminates expectations-driven liquidity traps.

(Joint with Taisuke Nakata)


Join Zoom Meeting

Meeting ID: 849 2958 1119 
Passcode: 361431


Sebastian will also be available for 30-minute meetings on that day. PhD students and Post Docs as well as faculty members are all kindly invited to talk with Sebastian individually on the day of the seminar. Please contact Rigas Oikonomou via mail ( if you wish to meet Sebastian. 


01 April
12:45 - 14:00