Discrete-Time Analysis Offers Solution to Economic Crisis in Liquidity Trap.
The article compares continuous and discrete-time versions of the Keynesian model to see if they give the same results. Different monetary policies were analyzed, like a Taylor rule and forward guidance. The study found that in a liquidity trap, the discrete-time analysis can avoid some negative outcomes of the continuous-time model, like exaggerated effects of price stickiness on inflation and output, overly large government multipliers, and unrealistic impacts of forward guidance.