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A Model of Monetary Policy Shocks for Financial Crises and Normal Conditions
Author(s) -
KEATING JOHN W.,
KELLY LOGAN J.,
SMITH A. LEE,
VALCARCEL VICTOR J.
Publication year - 2019
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.12522
Subject(s) - monetary policy , federal funds , market liquidity , monetary economics , asset (computer security) , economics , zero lower bound , quantitative easing , yield (engineering) , central bank , materials science , computer security , computer science , metallurgy
Deteriorating economic conditions in late 2008 led the Federal Reserve to lower the target federal funds rate to near zero, inject liquidity through novel facilities, and engage in large‐scale asset purchases. The combination of conventional and unconventional policy measures prevents using the effective federal funds rate to assess the effects of monetary policy beyond 2008. We employ a broad monetary aggregate to elicit the effects of monetary policy shocks both before and after 2008. Our estimates align well with major changes in the Fed's asset purchase programs and yield responses that are free from price, output, and liquidity puzzles that plague other approaches.