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Estimating monetary reaction functions at near zero interest rates

Tae-Hwan Kim () and Paul Mizen ()

Economics Letters, 2010, vol. 106, issue 1, 57-60

Abstract: The importance of truncated distributions for bias in estimation is demonstrated for a Japanese policy reaction function. Due to the proximity of a zero lower bound (ZLB) on interest rates, coefficient estimates can be biased upwards. This paper illustrates the importance of measuring and correcting estimates for this bias using Japan's unique experience of prolonged low inflation/deflation.

Keywords: Monetary; policy; Zero; lower; bounds; Japan; Tobit (search for similar items in EconPapers)
Date: 2010
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Handle: RePEc:eee:ecolet:v:106:y:2010:i:1:p:57-60