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  • Publication
    Accès libre
    Measuring Exchange Rate, Price, and Output Dynamics at the Effective Lower Bound
    (2018-10-4) ;
    Bäurle, Gregor
    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.