Global Effective Lower Bound and Unconventional Monetary Policy
In a standard open-economy New Keynesian model, the effective lower bound causes anomalies: output and terms of trade respond to a supply shock in the opposite direction compared to normal times. We introduce a tractable framework to accommodate for unconventional monetary policy. In our model, these anomalies disappear. We allow unconventional policy to be partially active and asymmetric between countries. Empirically, we find the US, Euro area, and UK have implemented a considerable amount of unconventional monetary policy: the US follows the historical Taylor rule, whereas the others have done less compared to normal times.
We thank Drew Creal, Charles Engel, Jordi Galí, Peter Karadi, Anna Lipińska, Argia Sbordone, Ken West, Michael Woodford, as well as participants at the NBER International Seminar on Macroeconomics, “Credit Market Frictions, Business Cycles, and Monetary Policy: A Research Conference in Honor of Charles Carlstrom and Timothy Fuerst” for helpful comments. Correspondence: firstname.lastname@example.org, zhangji@ pbcsf.tsinghua.edu.cn. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Global Effective Lower Bound and Unconventional Monetary Policy, Jing Cynthia Wu, Ji Zhang. in NBER International Seminar on Macroeconomics 2018, Galí and West. 2019
Jing Cynthia Wu & Ji Zhang, 2019. "Global effective lower bound and unconventional monetary policy," Journal of International Economics, . citation courtesy of