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On the Empirical (Ir)Relevance of the Zero Lower Bound Constraint

  • Series
  • Speaker(s)
    Jordi Gali (Universitat Pompeu Fabra, Spain)
  • Field
    Complexity, Macroeconomics
  • Location
    UvA - E-building, Roetersstraat 11, Room E0.03
  • Date and time

    March 20, 2019
    16:00 - 17:15

We estimate a time-varying structural VAR that describes the dynamic responses of a number of U.S. macro variables to different identified shocks. We find no significant changes in the estimated responses over the period when the federal funds rate attained the zero lower bound (ZLB). This result is consistent with the hypothesis of "perfect substitutability" between conventional and unconventional monetary policies. Montecarlo simulations based on artificial time series generated from a standard New Keynesian model point to the validity of our empirical approach to detect the changes in equilibrium dynamics associated with ZLB episodes. Joint with D. Debortoli and L. Gambetti.