Consumption and Money Uncertainty at the Zero Lower Bound

Riyad Abubaker ()
Additional contact information
Riyad Abubaker: University of California, Riverside

Economics Bulletin, 2016, vol. 36, issue 1, 449-463

Abstract: With the recent financial crisis of 2008, the Federal Reserve (Fed) reduced the nominal interest rate to nearly zero. This paper examines the impact of the Zero Lower Bound (ZLB) on the uncertainty of personal consumption and money stock. To calculate the second conditional moments as a proxy for uncertainty, the paper implements a multivariate GARCH model on U.S. personal consumption and real money balance from January 1980 to December 2014. A dummy variable is added to the variance equation. Here, the dummy variable takes 1 after the Fed encounters the ZLB constraint. Our main findings demonstrate that consumption uncertainty declines; and real money uncertainty increases significantly when the economy is constrained by the zero lower bound.

Keywords: Consumption; Money; Multivariate GARCH (search for similar items in EconPapers)
JEL-codes: C1 E4 (search for similar items in EconPapers)
Date: 2016-03-17
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I1-P46.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-15-00406

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().