In the New Keynesian Rational Expectations model with a Taylor rule, if the central bank follows the Taylor principle, in the steady state in which nominal interest rate is zero,

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In a zero nominal interest rate steady state, the economy is likely in a liquidity trap, where the central bank cannot lower rates further to stimulate the economy. This often results in inflation being lower than the target, as the central bank's tools are less effective in such a scenario.

In the New Keynesian Rational Expectations Model with a Taylor