Abstract

http://ssrn.com/abstract=1708218
 
 

References (37)



 
 

Citations (5)



 


 



Oil Shocks and the Zero Bound on Nominal Interest Rates


Martin Bodenstein


Board of Governors of the Federal Reserve System

Luca Guerrieri


Federal Reserve Board - Trade and Financial Studies

Christopher J. Gust


Federal Reserve Board - Trade and Financial Studies

October 25, 2010

FRB International Finance Discussion Paper No. 1009

Abstract:     
Beginning in 2009, in many advanced economies, policy rates reached their zero lower bound (ZLB). Almost at the same time, oil prices started rising again. We analyze how the ZLB affects the propagation of oil shocks. As these shocks move inflation and output in opposite directions, their effects on economic activity are cushioned when monetary policy is constrained. The burst of inflation from an oil price increase lowers real interest rates at the ZLB and stimulates the interest-sensitive component of GDP, offsetting the usual contractionary effects. In fact, if the increase in oil prices is gradual, the persistent rise in inflation can cause a GDP expansion.

Number of Pages in PDF File: 52

Keywords: Oil Shocks, zero lower bound, DSGE models

JEL Classification: F32, F41

working papers series


Download This Paper

Date posted: November 14, 2010  

Suggested Citation

Bodenstein, Martin and Guerrieri, Luca and Gust, Christopher J., Oil Shocks and the Zero Bound on Nominal Interest Rates (October 25, 2010). FRB International Finance Discussion Paper No. 1009. Available at SSRN: http://ssrn.com/abstract=1708218 or http://dx.doi.org/10.2139/ssrn.1708218

Contact Information

Martin Bodenstein (Contact Author)
Board of Governors of the Federal Reserve System ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
Luca Guerrieri
Federal Reserve Board - Trade and Financial Studies ( email )
20th St. and Constitution Ave.
Washington, DC 20551
United States
202-452-2550 (Phone)
Christopher J. Gust
Federal Reserve Board - Trade and Financial Studies ( email )
20th St. and Constitution Ave.
Washington, DC 20551
United States
Feedback to SSRN


Paper statistics
Abstract Views: 205
Downloads: 21
References:  37
Citations:  5

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.266 seconds