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<p>Empirical studies indicate that output and inflation expectations respond similarly to supply shocks, regardless of whether or not the economy is at the zero lower bound (ZLB). This observation contradicts the predictions of the New Keynesian model. I propose that this discrepancy may arise from demand-side factors contaminating supply shocks. To investigate this, I use VAR restriction methods to isolate pure technology shocks from demand-side influences. My analysis demonstrates that positive technology shocks reduce inflation expectations both at and away from the ZLB. In contrast, these shocks decrease output at the ZLB but increase it away from the ZLB, aligning with the predictions of the New Keynesian model.</p>

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Are positive technology shocks expansionary at the zero lower bound?

  • 期刊论文

  • 发表日期：

    2026年1月28日

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  • Yangyang Ji

摘要

Empirical studies indicate that output and inflation expectations respond similarly to supply shocks, regardless of whether or not the economy is at the zero lower bound (ZLB). This observation contradicts the predictions of the New Keynesian model. I propose that this discrepancy may arise from demand-side factors contaminating supply shocks. To investigate this, I use VAR restriction methods to isolate pure technology shocks from demand-side influences. My analysis demonstrates that positive technology shocks reduce inflation expectations both at and away from the ZLB. In contrast, these shocks decrease output at the ZLB but increase it away from the ZLB, aligning with the predictions of the New Keynesian model.