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Evaluating Monetary Policy When Nominal Interest Rates Are Almost Zero

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Listed author(s):
  • Ippei Fujiwara

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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Paper provided by Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 620.

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Date of creation: 11 Aug 2004
Handle: RePEc:ecm:feam04:620
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Keywords: Markov Switching VAR; Monetary Policy;

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Find related papers by JEL classification:
  • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
  • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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