{"id":17814,"date":"2025-12-22T14:53:14","date_gmt":"2025-12-22T12:53:14","guid":{"rendered":"https:\/\/www.poleconomix.gr\/portal\/?p=17814"},"modified":"2025-12-22T14:53:14","modified_gmt":"2025-12-22T12:53:14","slug":"understanding-liquidity-traps","status":"publish","type":"post","link":"https:\/\/www.poleconomix.gr\/portal\/understanding-liquidity-traps\/","title":{"rendered":"Understanding liquidity traps"},"content":{"rendered":"\n<p><a href=\"mailto:research.highlights@aeapubs.org\">Tyler Smith<\/a><br><\/p>\n\n\n\n<p>When the economy weakens, central banks respond by lowering interest rates to encourage borrowing and spending. But recent large downturns, such as the Great Recession and Japan\u2019s Long Recession, have highlighted a major limitation of this tool\u2014the zero lower bound. In such extreme circumstances, the economy can get stuck in what economists call a liquidity trap.<\/p>\n\n\n\n<p>In a&nbsp;<a href=\"https:\/\/www.aeaweb.org\/articles?id=10.1257\/jel.20241306\">paper in the&nbsp;<em>Journal of Economic Literature<\/em><\/a>, authors&nbsp;<a href=\"https:\/\/sites.google.com\/site\/gautieggertsson\/home\">Gauti B. Eggertsson<\/a>&nbsp;and&nbsp;<a href=\"https:\/\/eg1evs.github.io\/\">Sergei K. Egiev<\/a>&nbsp;offer a unified theoretical framework for understanding liquidity traps. The authors argue that for fast-moving forces that quickly drive interest rates down, such as banking crises, government budgets and public expectations play a key role. They examine these forces in the largest economic downturn in US history\u2014the Great Depression.&nbsp;<\/p>\n\n\n\n<p>\u03a0\u03b7\u03b3\u03ae: www.aeaweb.org\/<\/p>\n\n\n\n<p><a href=\"https:\/\/www.aeaweb.org\/research\/chart\/liquidity-traps-unified-theory\">\u03c0\u03bb\u03ae\u03c1\u03b5\u03c2 \u03ba\u03b5\u03af\u03bc\u03b5\u03bd\u03bf<\/a><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Tyler Smith When the economy weakens, central banks respond by lowering interest rates to encourage borrowing and spending. But recent large downturns, such as the Great Recession and Japan\u2019s Long Recession, have highlighted a major limitation of this tool\u2014the zero lower bound. In such extreme circumstances, the economy can get stuck in what economists call [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18,39,4],"tags":[],"class_list":["post-17814","post","type-post","status-publish","format-standard","hentry","category-18","category-39","category-proposals"],"_links":{"self":[{"href":"https:\/\/www.poleconomix.gr\/portal\/wp-json\/wp\/v2\/posts\/17814","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.poleconomix.gr\/portal\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.poleconomix.gr\/portal\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.poleconomix.gr\/portal\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.poleconomix.gr\/portal\/wp-json\/wp\/v2\/comments?post=17814"}],"version-history":[{"count":1,"href":"https:\/\/www.poleconomix.gr\/portal\/wp-json\/wp\/v2\/posts\/17814\/revisions"}],"predecessor-version":[{"id":17815,"href":"https:\/\/www.poleconomix.gr\/portal\/wp-json\/wp\/v2\/posts\/17814\/revisions\/17815"}],"wp:attachment":[{"href":"https:\/\/www.poleconomix.gr\/portal\/wp-json\/wp\/v2\/media?parent=17814"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.poleconomix.gr\/portal\/wp-json\/wp\/v2\/categories?post=17814"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.poleconomix.gr\/portal\/wp-json\/wp\/v2\/tags?post=17814"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}