Citation

Discussion Paper Details

Please find the details for DP12691 in an easy to copy and paste format below:

Full Details

Title: On the Empirical (Ir)Relevance of the Zero Lower Bound Constraint

Author(s): Davide Debortoli, Jordi Gal� and Luca Gambetti

Publication Date: February 2018

Keyword(s): liquidity trap, regime changes, time-varying structural vector-autoregressive models and unconventional monetary policies

Programme Area(s): Monetary Economics and Fluctuations

Abstract: We estimate a time-varying structural VAR that describes the dynamic responses of a number of U.S. macro variables to different identified shocks. We find no significant changes in the estimated responses over the period when the federal funds rate attained the zero lower bound (ZLB). This result is consistent with the hypothesis of "perfect substitutability" between conventional and unconventional monetary policies. Montecarlo simulations based on artificial time series generated from a standard New Keynesian model point to the validity of our empirical approach to detect the changes in equilibrium dynamics associated with ZLB episodes.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12691

Bibliographic Reference

Debortoli, D, Gal�, J and Gambetti, L. 2018. 'On the Empirical (Ir)Relevance of the Zero Lower Bound Constraint'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12691