Options
Measuring Exchange Rate, Price, and Output Dynamics at the Effective Lower Bound
Auteur(s)
Bäurle, Gregor
Date Issued
2018-10-4
Journal
Oxford Bulletin of Economics and Statistics
Vol.
6
No
80
From page
1243
To page
1266
Reviewed by peer
1
Abstract
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.
Publication type
journal article
