Working Paper: CEPR ID: DP14064
Authors: Barbara Rossi
Abstract: The recent financial crisis led central banks to lower their interest rates in order to stimulate the economy until they hit the zero lower bound. How should one identify monetary policy shocks in unconventional times? Are unconventional monetary policies as effective as conventional ones? And has the monetary policy transmission mechanism changed in the zero lower bound era? This article aims at providing an overview of the econometric challenges and solutions to the identification of monetary policy shocks in unconventional times as well as a survey of their empirical effects on the economy.
Keywords: shock identification; VARs; zero lower bound; unconventional monetary policy; monetary policy; external instruments; forward guidance
JEL Codes: E4; E52; E21; H31; I3; D1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Monetary policy shocks (E39) | Long-term yields (E43) |
| Monetary policy shocks (E39) | Asset prices (G19) |
| Forward guidance announcements (E60) | Financial markets (G19) |
| Unconventional monetary policy (E52) | Economic variables (E39) |
| Unconventional monetary policy (E52) | Asset prices (G19) |