Identification at the Zero Lower Bound

Author:

Mavroeidis Sophocles1

Affiliation:

1. Department of Economics, University of Oxford

Abstract

I show that the zero lower bound (ZLB) on interest rates can be used to identify the causal effects of monetary policy. Identification depends on the extent to which the ZLB limits the efficacy of monetary policy. I propose a simple way to test the efficacy of unconventional policies, modeled via a “shadow rate.” I apply this method to U.S. monetary policy using a three‐equation structural vector autoregressive model of inflation, unemployment, and the Federal Funds rate. I reject the null hypothesis that unconventional monetary policy has no effect at the ZLB, but find some evidence that it is not as effective as conventional monetary policy.

Publisher

The Econometric Society

Subject

Economics and Econometrics

Cited by 17 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

1. Testing the Effectiveness of Unconventional Monetary Policy in Japan and the United States;American Economic Journal: Macroeconomics;2024-04-01

2. The local to unity dynamic Tobit model;Journal of Econometrics;2024-04

3. Nowcasting the output gap with shadow rates;Economics Letters;2024-03

4. Permanent and temporary monetary policy shocks and the dynamics of exchange rates;Journal of International Economics;2024-01

5. Monetary Policy across Inflation Regimes;Staff Reports (Federal Reserve Bank of New York);2024-01

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