Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Apr, 1969, Volume 37, Issue 2

A Nonlinear, Maximum Likelihood Estimate of the Liquidity Trap

https://doi.org/0012-9682(196904)37:2<324:ANMLEO>2.0.CO;2-G
p. 324-332

Howard W. Pifer

Recent articles in Econometrica have questioned whether the empirical evidence from time series data supports the Keynesian hypothesis of the existence of a liquidity trap for low interest rates. This paper proposes a method by which one can obtain the maximum likelihood estimate of the minimum interest rate without imposing a priori constraints upon the parameters in the demand for money equation. Alternative estimating procedures are considered and found to yield consistent estimates of the interest rate floor.


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