Modelling safety trap?

Hello guys, I need some help!

I would like to build a safety trap (liquidity trap in market for safe assets) into an existing dsge model, in order to see how it affects the effectivity of forward guidance.
More specifically, I want to examine the presence of a safety trap as a possible explanation for the “forward guidance puzzle”.
The problem is that I have no experience with DSGE modelling (or any other kind) whatsoever (freshman economics student).
As of now, I even have a hard time understanding papers which contain DSGE models.
I’m really eager to learn though (as I encounter them a lot!).

Would it be possible to achieve my goal in about a month (it’s for a paper)?
If so, what steps should I take in order to get to the required level (recommended readings and the like)?
Any tips for my specific issue? My best guess is that it might have something to do with plugging in a zero lower bound and a risk premium into the model, but that might sound incredibly naive (I don’t even have a clue how that would have to be done). :blush:

Any replies will be greatly appreciated!


If you have no prior experience in DSGE modeling, you typically need at least three months. If you only have one, forget this project. It is impossible.

Okay, thanks!