Paul Krugman's "Liquidity Trap"

May 1, 2013

Paul Krugman proposes a heuristic model to analyze the current macroeconomic situation.

This note analyzes the model, situates its origins in the history of economic thought, and suggests that its policy implications may not be robust. The specification blends ideas from the Swedish economist Knut Wicksell and John Maynard Keynes from Cambridge University, with more flavor of the former. 

Author: Lance Taylor
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