scholarly journals The Empirical Implications of the Interest-Rate Lower Bound

2017 ◽  
Vol 107 (7) ◽  
pp. 1971-2006 ◽  
Author(s):  
Christopher Gust ◽  
Edward Herbst ◽  
David López-Salido ◽  
Matthew E. Smith
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Lower Bound ◽  
Bayesian Methods ◽  
Dsge Model ◽  
Slow Recovery ◽  
Us Economy ◽  
The Us ◽  
The Interest Rate ◽  
Empirical Implications

Using Bayesian methods, we estimate a nonlinear DSGE model in which the interest-rate lower bound is occasionally binding. We quantify the size and nature of disturbances that pushed the US economy to the lower bound in late 2008 as well as the contribution of the lower bound constraint to the resulting economic slump. We find that the interest-rate lower bound was a significant constraint on monetary policy that exacerbated the recession and inhibited the recovery, as our mean estimates imply that the zero lower bound (ZLB) accounted for about 30 percent of the sharp contraction in US GDP that occurred in 2009 and an even larger fraction of the slow recovery that followed. (JEL C11, C32, E12, E23, E32, E43, E52, G01)

scholarly journals The Empirical Implications of the Interest-Rate Lower Bound

2017 ◽  
Vol 2017 (083r2) ◽  
pp. 1-74
Author(s):  
Christopher J. Gust ◽  
◽  
Edward P. Herbst ◽  
J. David López-Salido ◽  
Matthew E. Smith
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
The Interest Rate ◽  
Empirical Implications

scholarly journals The Empirical Implications of the Zero Lower Bound on the Interest Rate: The Case of the Czech Economy

2016 ◽  
Vol 64 (2) ◽  
pp. 603-616 ◽  
Author(s):  
Miroslav Hloušek
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
Zero Lower Bound ◽  
Inflation Volatility ◽  
Percentage Points ◽  
Monetary Policy Rule ◽  
Tradable Sector ◽  
The Interest Rate ◽  
Macroeconomic Implications ◽  
Empirical Implications

This paper uses an estimated DSGE model of the Czech economy to study the macroeconomic implications of various shocks when the interest rate is constrained by the zero lower bound. The goal is to identify which shocks represent threats for the economy and how large the distortions are. The results show that four single shocks can take the economy to the zero lower bound, and that of the four, productivity shock in the tradable sector is the most dangerous. The consequences for the behaviour of macroeconomic variables are nontrivial and, quite naturally, increase with the size of the shock and the frequency of occurrence. If the economy is subject to all model specific shocks, there are distortions in terms of lower average values of output and consumption (by more than one percentage point) and higher inflation volatility (by more than six percentage points). To reduce these costs, the central bank should give higher weight to inflation and lower weight to the output gap in monetary policy rule.

scholarly journals The Aftermath of the Tariff War on China

2020 ◽  
Vol 16 (2) ◽  
pp. 22
Author(s):  
Nicholas Bitar
Keyword(s):  
Monetary Policy ◽  
Positive Impact ◽  
New Keynesian ◽  
Us Economy ◽  
The Us ◽  
Short Run ◽  
The Interest Rate ◽  
Positive Effect ◽  
Shed Light ◽  
Trump Administration

Will the US sustain its economy after the tariff war with China, or will the economy regress? This paper offers a conceptual framework, based on the tenets of New-Keynesian theory, to answer this question. I anticipate that the tariff will have a positive effect on the GDP of the US economy in the short run while prices will rise. When adding the most recent reforms of interest cut by the Fed to 1.75% in September (2019) the model concludes a better outcome. Followed by an expansionary monetary policy by reducing the interest rate, the aftermath of the tariff war on China seems to have a positive impact on the US income and productivity. Obviously, some critics to the Trump Administration indeed shed light on the curtailed global and US social welfare that is caused by the inflationary effect of the tariff war, in addition to the deteriorating conditions for some trading sectors in the US which would certainly lead to unemployment. But the benefits to the US economy that are translated by the New-Keynesian theoretical framework show a positive impact on US production, employment, and GDP.

scholarly journals Welfare-Based Monetary Policy Rules in an Estimated DSGE Model of the Us Economy

2006 ◽  
Author(s):  
Michel Juillard ◽  
Philippe Karam ◽  
Douglas Laxton ◽  
Paolo A. Pesenti
Keyword(s):  
Monetary Policy ◽  
Dsge Model ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Us Economy ◽  
The Us

scholarly journals The Impact of Electronic Money on Monetary Policy: Based on DSGE Model Simulations

Mathematics ◽  
2021 ◽  
Vol 9 (20) ◽  
pp. 2614
Author(s):  
Sumei Luo ◽  
Guangyou Zhou ◽  
Jinpeng Zhou
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
New Keynesian ◽  
Dsge Model ◽  
Economic Sectors ◽  
Electronic Money ◽  
Savings And Loans ◽  
Interactive Relationship ◽  
The Interest Rate ◽  
The Impact

Starting with the interactive relationship between electronic money and household consumption stimuli, this paper deeply analyzes the changes in the behavior of each monetary subject under the impact of electronic money, and establishes a DSGE model based on the three economic sectors of family, commercial bank and central bank under the New Keynesian framework. On this basis, the impact of electronic money on savings, loans, output and the interest rate, and its impact on monetary policy, are described by numerical simulation. The simulation results show that: (1) electronic money has asymmetric effects on savings and loans, but an irrational deviation on households; (2) the influence of electronic money on the interest rate has a reverse effect, and the “inverse adjustment” of the interest rate increases the management difficulty of the micro subject to a certain extent, and affects the effectiveness of monetary policy; (3) the regulatory effect of price monetary policy is better than that of quantitative monetary policy, and electronic money has the effect of its risk restraining impact. Finally, based on the analysis, this paper gives policy recommendations.

scholarly journals The Empirical Implications of the Interest-Rate Lower Bound

2016 ◽  
Vol 2016 (83r1) ◽  
pp. 1-47 ◽  
Author(s):  
Christopher J. Gust ◽  
◽  
J. David López-Salido ◽  
Matthew E. Smith ◽  
Edward P. Herbst
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
The Interest Rate ◽  
Empirical Implications

scholarly journals Fluctuations in the Swiss Franc: What Has Changed Since the Euro's Introduction?

2002 ◽  
Vol 22 (2) ◽  
pp. 143-159 ◽  
Author(s):  
Andreas M. Fischer
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Open Economy ◽  
Small Open Economy ◽  
Swiss Franc ◽  
The Us ◽  
Us Dollar ◽  
The Interest Rate ◽  
Shed Light

The monetary implications arising from EMU for Swiss monetary policy show up primarily in the exchange rate. As of yet, fluctuations in the Swiss franc against the euro have been surprisingly moderate. The Swiss franc has thus tracked the euro's decline against the US dollar without experiencing strong inflationary pressures and a convergence in the interest-rate differential: a paradoxical result for a small open economy. This paper examines critically whether the recent record reveals information about a change in SNB monetary policy. It also attempts to shed light on the SNB's ability to implement an independent monetary policy with the new landscape defined by EMU. Four hypotheses of euro tracking are considered.

scholarly journals The Empirical Implications of the Interest-Rate Lower Bound

2012 ◽  
Vol 2012 (83) ◽  
pp. 1-55 ◽  
Author(s):  
Christopher J. Gust ◽  
◽  
J. David López-Salido ◽  
Matthew E. Smith
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
The Interest Rate ◽  
Empirical Implications

scholarly journals Is there a Trade-Off between Inflation and Output Stabilization?

2013 ◽  
Vol 5 (2) ◽  
pp. 1-31 ◽  
Author(s):  
Alejandro Justiniano ◽  
Giorgio E Primiceri ◽  
Andrea Tambalotti
Keyword(s):  
Monetary Policy ◽  
Market Power ◽  
Optimal Policy ◽  
Economic Fluctuations ◽  
Dsge Model ◽  
Trade Off ◽  
Equilibrium Behavior ◽  
Us Economy ◽  
Output Stabilization ◽  
The Us

We find that the answer is no in an estimated DSGE model of the US economy in which exogenous movements in workers' market power are not a major driver of observed economic fluctuations. If they are, the tension between the conflicting stabilization objectives of monetary policy increases, but with negligible effects on the equilibrium behavior of the economy under optimal policy. (JEL E12, E23, E24, E31, E32, E52)

scholarly journals The Empirical Implications of the Interest-Rate Lower Bound

2012 ◽  
Author(s):  
Christopher J. Gust ◽  
David Lopez-Salido ◽  
Matthew E. Smith
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
The Interest Rate ◽  
Empirical Implications
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