NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

The effects of quasi-random monetary experiments

Òscar Jordà, Moritz Schularick, Alan M. Taylor

NBER Working Paper No. 23074
Issued in January 2017, Revised in June 2018
NBER Program(s):Development of the American Economy, Economic Fluctuations and Growth, International Finance and Macroeconomics, Monetary Economics

The trilemma of international finance explains why interest rates in countries that fix their exchange rates and allow unfettered cross-border capital flows are largely outside the monetary authority’s control. Using historical panel-data since 1870 and using the trilemma mechanism to construct an external instrument for exogenous monetary policy fluctuations, we show that monetary interventions have very different causal impacts, and hence implied inflation-output trade-offs, according to whether: (1) the economy is operating above or below potential; (2) inflation is low, thereby bringing nominal rates closer to the zero lower bound; and (3) there is a credit boom in mortgage markets. We use several adjustments to account for potential spillover effects including a novel control function approach. The results have important implications for monetary policy.

download in pdf format
   (556 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23074

Users who downloaded this paper also downloaded* these:
Jordà, Richter, Schularick, and Taylor w23287 Bank Capital Redux: Solvency, Liquidity, and Crisis
Shiller w23075 Narrative Economics
Farmer w23109 Post Keynesian Dynamic Stochastic General Equilibrium Theory
Guerreiro, Rebelo, and Teles w23806 Should Robots be Taxed?
Auclert w23451 Monetary Policy and the Redistribution Channel
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us