Estimating the Expected Duration of the Zero Lower Bound in DSGE Models with Forward Guidance

37 Pages Posted: 28 Jul 2014

See all articles by Mariano Kulish

Mariano Kulish

University of New South Wales (UNSW)

James Morley

University of Sydney

Tim Robinson

University of Melbourne - Melbourne Institute of Applied Economic and Social Research

Multiple version iconThere are 2 versions of this paper

Date Written: July 2014

Abstract

Motivated by the increasing use of forward guidance, we consider DSGE models in which the central bank holds the policy rate fixed for an extended period of time. Private agents’ beliefs about how long the fixed-rate regime will last influences current output and inflation. We estimate the structural for US data and infer the expected duration of the zero lower bound regime. Our results suggest that the average expected duration is around 3 quarters and has varied significantly since the onset of the zero lower bound regime, with changes that can be related to the Federal Reserve’s forward guidance.

Keywords: zero lower bound, forward guidance

JEL Classification: E52, E58

Suggested Citation

Kulish, Mariano and Morley, James and Robinson, Tim, Estimating the Expected Duration of the Zero Lower Bound in DSGE Models with Forward Guidance (July 2014). Melbourne Institute Working Paper No. 16/14. Available at SSRN: https://ssrn.com/abstract=2472775 or http://dx.doi.org/10.2139/ssrn.2472775

Mariano Kulish

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

James Morley

University of Sydney ( email )

Rm 370 Merewether (H04)
Sydney, NSW 2006 2008
Australia

HOME PAGE: http://https://sites.google.com/site/jamescmorley/

Tim Robinson (Contact Author)

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5, FBE Building, 111 Barry Street
161 Barry Street
Carlton, VIC 3053
Australia

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