Oil shocks and the zero bound on nominal interest rates
AbstractBeginning in 2008, in many advanced economies, policy rates reached their zero lower bound (ZLB) and almost at the same time, oil prices started rising again. We analyze how the ZLB affects the propagation of oil shocks. As these shocks move inflation and output in opposite directions, their effects on economic activity are cushioned when monetary policy is constrained. The burst of inflation from an oil price increase lowers real interest rates at the ZLB and stimulates the interest-sensitive component of GDP, offsetting the usual contractionary effects. We show that the mitigation of the output decline from the zero lower bound depends on the source of the shock and on the persistence that alternative shocks induce in the price of oil.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 32 (2013)
Issue (Month): C ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30443
Oil shocks; Zero lower bound; DSGE models;
Other versions of this item:
- Martin Bodenstein & Luca Guerrieri & Christopher Gust, 2010. "Oil shocks and the zero bound on nominal interest rates," International Finance Discussion Papers 1009, Board of Governors of the Federal Reserve System (U.S.).
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Luca Guerrieri & Matteo Iacoviello & Raoul Minetti, .
"Banks, Sovereign Debt, and the International Transmission of Business Cycles,"
NBER International Seminar on Macroeconomics,
University of Chicago Press, vol. 9(1), pages 181 - 213.
- Luca Guerrieri & Matteo Iacoviello & Raoul Minetti, 2012. "Banks, Sovereign Debt and the International Transmission of Business Cycles," NBER Chapters, in: NBER International Seminar on Macroeconomics 2012, pages 181-213 National Bureau of Economic Research, Inc.
- Luca Guerrieri & Matteo Iacoviello & Raoul Minetti, 2012. "Banks, Sovereign Debt and the International Transmission of Business Cycles," NBER Working Papers 18303, National Bureau of Economic Research, Inc.
- Luca Guerrieri & Matteo Iacoviello & Raoul Minetti, 2012. "Banks, sovereign debt and the international transmission of business cycles," International Finance Discussion Papers 1067, Board of Governors of the Federal Reserve System (U.S.).
- Gust, Christopher & López-Salido, J David & Smith, Matthew E, 2012.
"The Empirical Implications of the Interest-Rate Lower Bound,"
CEPR Discussion Papers
9214, C.E.P.R. Discussion Papers.
- Christopher Gust & David Lopez-Salido & Matthew E. Smith, 2012. "The empirical implications of the interest-rate lower bound," Finance and Economics Discussion Series 2012-83, Board of Governors of the Federal Reserve System (U.S.).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If references are entirely missing, you can add them using this form.