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Estimating Monetary Policy Rules When Nominal Interest Rates Are Stuck at Zero

Author

Listed:
  • Jinill Kim

    (Department of Economics, Korea University, Seoul, Republic of Korea)

  • Seth Pruitt

    (Federal Reserve Board)

Abstract

Did the Federal Reserve's response to economic fundamentals change with the onset of the Global Financial Crisis? Estimation of a monetary policy rule to answer this question faces a censoring problem since the interest rate target has been set at the zero lower bound since late 2008. Surveys by forecasters allow us to sidestep the problem and to use conventional regressions and break tests. We nd that the Fed's in ation response has decreased and that the unemployment response has remained as strong, which suggests that the Federal Reserve's commitment to stable in ation has become weaker in the eyes of the professional forecasters.

Suggested Citation

  • Jinill Kim & Seth Pruitt, 2015. "Estimating Monetary Policy Rules When Nominal Interest Rates Are Stuck at Zero," Discussion Paper Series 1502, Institute of Economic Research, Korea University.
    • Handle: RePEc:iek:wpaper:1502
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    Cited by:

    1. Michael D Bauer & Carolin E Pflueger & Adi Sunderam, 2024. "Perceptions About Monetary Policy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 139(4), pages 2227-2278.
    2. Arai, Natsuki, 2023. "The FOMC’s new individual economic projections and macroeconomic theories," Journal of Banking & Finance, Elsevier, vol. 151(C).
    3. Fujiwara, Ippei & Nakazono, Yoshiyuki & Ueda, Kozo, 2015. "Policy regime change against chronic deflation? Policy option under a long-term liquidity trap," Journal of the Japanese and International Economies, Elsevier, vol. 37(C), pages 59-81.
    4. Ippei Fujiwara & Yoshiyuki Nakazono & Kozo Ueda, 2015. "Policy Regime Change Against Chronic Deflation?," Working Papers halshs-01545830, HAL.
    5. Yoshiyuki Nakazono, 2016. "Inflation expectations and monetary policy under disagreements," Bank of Japan Working Paper Series 16-E-1, Bank of Japan.
    6. Brent Bundick, 2015. "Estimating the monetary policy rule perceived by forecasters," Macro Bulletin, Federal Reserve Bank of Kansas City, pages 1-3, December.
    7. Jinill Kim & Seth Pruitt, 2017. "Estimating Monetary Policy Rules When Nominal Interest Rates Are Stuck at Zero," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(4), pages 585-602, June.
    8. Hirokuni Iiboshi & Mototsugu Shintani & Kozo Ueda, 2022. "Estimating a Nonlinear New Keynesian Model with the Zero Lower Bound for Japan," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(6), pages 1637-1671, September.
    9. Hibiki Ichiue & Yoichi Ueno, 2018. "A Survey-based Shadow Rate and Unconventional Monetary Policy Effects," IMES Discussion Paper Series 18-E-05, Institute for Monetary and Economic Studies, Bank of Japan.

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    JEL classification:

    • E53 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Deposit Insurance
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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