ZLB + deterministic model + permanent tax change

[jpfeifer]

Try to move there step by step. Increase the shock size in this model without ZLB to a point where you actually hit the ZLB. Then impose the ZLB and check whether the model still works.

[fabioit]

Alright, awesome.
Let me just get it right: it has to be the same, say, fiscal shock to bring the interest rate to the ZLB, right? It cannot be another shock, like a shock to consumption, to produce this effect while the fiscal shock hits, can it? The idea is that you already are in a recession when you perform this permanent fiscal policy change.

[jpfeifer]

Of course you can combine shocks. Using e.g. a preference shock to get to the ZLB is perfectly fine.