The ZLB as a form of structural change that can be exploited for identification
I develop a general econometric methodology for the identification and estimation of structural vector autoregressions (SVARs) with an occasionally binding constraint. The method provides a simple way to test the efficacy of unconventional policies, modelled via a “shadow rate”. Application of the method to US monetary policy using a three-equation SVAR model in inflation, unemployment and the federal funds rate provides some evidence that unconventional policies are partially effective.
Identification at the Zero Lower Bound
Author: Sophocles Mavroeidis
From: University of Oxford
The empirical irrelevance of the ZLB constraint
Our approach had made use of a structural vector autoregressive model with time-varying coefficients (TVC-SVAR) to describe the dynamic responses of a number of U.S. macro variables to different shocks (both supply and demand), as well as the changes over time in those responses. We find that those responses did not experience any major change during the ZLB period. This result is consistent with the hypothesis of “perfect substitutability” between conventional and unconventional monetary policies.
On the Empirical (Ir)Relevance of the Zero Lower Bound Constraint
Authors: Davide Debortoli, Jordi Galí, Luca Gambetti
From: Universitat Pompeu Fabra, Universitat Autonoma de Barcelona