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Monetary Policy and Real Borrowing Costs at the Zero Lower Bound

  • Simon Gilchrist
  • David López-Salido
  • Egon Zakrajšek

This paper compares the effects of conventional monetary policy on real borrowing costs with those of the unconventional measures employed after the target federal funds rate hit the zero lower bound (ZLB). For the ZLB period, we identify two policy surprises: changes in the 2-year Treasury yield around policy announcements and changes in the 10-year Treasury yield that are orthogonal to those in the 2-year yield. The efficacy of unconventional policy in lowering real borrowing costs is comparable to that of conventional policy, in that it implies a complete pass-through of policy-induced movements in Treasury yields to comparable-maturity private yields.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 20094.

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Date of creation: May 2014
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Publication status: published as Simon Gilchrist & David López-Salido & Egon Zakrajšek, 2015. "Monetary Policy and Real Borrowing Costs at the Zero Lower Bound," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(1), pages 77-109, January.
Handle: RePEc:nbr:nberwo:20094
Note: ME
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