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Measuring Exchange Rate, Price, and Output Dynamics at the Effective Lower Bound

Daniel Kaufmann & Gregor Bäurle

Résumé New Keynesian models with sticky prices make stark predictions about how the economy responds to shocks under different monetary policy regimes when short-term interest rates are constrained by an effective lower bound. We use the Swiss case as a laboratory to find evidence in favour of these predictions. We propose a Bayesian VAR to estimate impulse responses to risk shocks for short periods with a binding effective lower bound and with a publicly announced minimum exchange rate. In line with predictions from theory, we find that with a binding effective lower bound, the responses of the exchange rate, prices, and output become more persistent. However, the minimum exchange rate attenuates this adverse impact.
   
Mots-clés Effective lower bound on short-term interest rates; Nonconventional
monetary policy; Exchange rate targets; Bayesian SVAR
   
Citation Kaufmann, D., & Bäurle, G. (2018). Measuring Exchange Rate, Price, and Output Dynamics at the Effective Lower Bound. Oxford Bulletin of Economics and Statistics, 80(6), 1243-1266.
   
Type Article de périodique (Anglais)
Date de publication 4-10-2018
Nom du périodique Oxford Bulletin of Economics and Statistics
Volume 80
Numéro 6
Pages 1243-1266
URL https://onlinelibrary.wiley.com/doi/abs/10.1111/obes.12260