In the text, we have thought about the kind of shock which might make the ZLB bind as a negative shock to the IS curve (e.g. a reduction in ft). Could a shock to At make the ZLB bind? What sign would this shock have to be to make it bind? In the data, most episodes where the ZLB binds (the US in the wake of the Great Recession, Japan during the 1990s, and the US during the Great Depression) output is low. Given this, would a supply shock as the reason for a binding ZLB make empirical sense?
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