Time-Consistent Management of a Liquidity Trap with Government Debt
Bank of Canada
New Keynesian model with monopolistic competition, Rotemberg quadratic price adjustment costs, distortionary labor income tax, long-term government debt with exponentially decaying payoffs, and zero lower bound on nominal interest rates. Optima
intermediate firms: monopolistic competition with quadratic price adjustment costs; final firms: perfect competition with CES aggregation
Table 2 p.17
Deterministic steady state without ZLB risk