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Evaluating monetary policy when nominal interest rates are almost zero

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  • Fujiwara, Ippei

Abstract

The non-negativity constraint on nominal interest rates may have been a major factor behind a putative structural break in the effectiveness of monetary policy. To check for the existence of such a break without making prior assumptions about timing, and to enable comparison between pre- and post-break monetary policy, we employ an identified Markov switching VAR framework. Estimation results support the existence of a structural break around the time when the de-facto zero nominal interest rate policy was resumed and the effectiveness of monetary policy is seen to weaken since then although slightly positive effects from monetary easing still exist

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Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 20 (2006)
Issue (Month): 3 (September)
Pages: 434-453

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Handle: RePEc:eee:jjieco:v:20:y:2006:i:3:p:434-453

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Web page: http://www.elsevier.com/locate/inca/622903

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