ZLB constraint and forward guidance

Dynare help (legacy posts)
1

Hi

I would like to somehow implement the ZLC constraint with forward guidance somehow but not sure how to tackle it due to the non-linearity. I think I should somehow make an algorithm (or maybe I can use Holden’s? I cannot figure out whether it is suitable for this) which keeps the short-term interest rate at 0 or 0.25 for a pre-specified period and then simulate/solve. It is only for a standard Benchmark New Keynesian model - I don’t know if there is any code example out there?

Thx for help in advance

2

See [The Zero Lower Bound Constraint on Nominal Int. Rate). You might also want to check if there is something in macromodelbase.com/ and take a look at “OccBin: A Toolkit for Solving Dynamic Models With Occasionally Binding Constraints Easily” at www2.bc.edu/matteo-iacoviello/research_files/TOOLKIT_PAPER.pdf

3

Thank you - I will look into your links and return if I have any further questions. Thank you very much once more.