Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound

56 Pages Posted: 14 May 2014

See all articles by Jing Cynthia Wu

Jing Cynthia Wu

University of Notre Dame - Department of Economics; National Bureau of Economic Research (NBER)

Fan Dora Xia

Bank for International Settlements (BIS) - Monetary and Economic Department

Multiple version iconThere are 2 versions of this paper

Date Written: May 2014

Abstract

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.

Suggested Citation

Wu, Jing Cynthia and Xia, Fan Dora, Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound (May 2014). NBER Working Paper No. w20117. Available at SSRN: https://ssrn.com/abstract=2436723

Jing Cynthia Wu (Contact Author)

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Fan Dora Xia

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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