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Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound
Author(s) -
WU JING CYNTHIA,
XIA FAN DORA
Publication year - 2016
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12300
Subject(s) - zero lower bound , benchmark (surveying) , economics , monetary policy , zero (linguistics) , unemployment rate , interest rate , unemployment , monetary economics , econometrics , upper and lower bounds , nonlinear system , macroeconomics , mathematics , geography , physics , mathematical analysis , linguistics , philosophy , geodesy , quantum mechanics
This paper employs an approximation that makes a nonlinear term structure model extremely tractable for analysis of an economy operating near the zero lower bound for interest rates. We show that such a model offers an excellent description of the data compared to the benchmark model and can be used to summarize the macroeconomic effects of unconventional monetary policy. Our estimates imply that the efforts by the Federal Reserve to stimulate the economy since July 2009 succeeded in making the unemployment rate in December 2013 1% lower, which is 0.13% more compared to the historical behavior of the Fed.