 Macroeconomic news and the real interest rates at the zero lower boundJournal of Macroeconomics, 2016, vol. 48, issue C, 172-185 Abstract: Whether the real interest rates respond in a different manner to macroeconomic news at the zero lower bound (ZLB) as compared to the case away from the ZLB is essential for assessing the effectiveness of government policies and the validity of the policy implications of New Keynesian models at the ZLB. The results from analyzing “real-side” news and price news reveal that nominal rates are less sensitive to news, while real interest rates respond to some news in the opposite direction at the zero lower bound as they would do in normal times. This suggests that, at least in the short run, policies that increase inflation (e.g., fiscal expansion) are favorable to the economy at the zero lower bound; this result is consistent with the prediction of the New Keynesian models. By using an identification strategy based on heterogeneity, I find that at the ZLB, monetary policy news is less effective in affecting short- and medium-term real rates and its effect dies off faster. Keywords: Zero lower bound; Monetary policy; Macroeconomic news; Real interest rate (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:48:y:2016:i:c:p:172-185 DOI: 10.1016/j.jmacro.2016.04.002 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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