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

Jing Cynthia Wu, Fan Dora Xia

NBER Working Paper No. 20117
Issued in May 2014
NBER Program(s):   AP   EFG   ME

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.

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This paper was revised on May 22, 2015

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20117

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