Evaluating Monetary Policy When Nominal Interest Rates Are Almost Zero

Ippei Fujiwara

No 620, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: The non-negativity constraint on nominal interest rates may have been a major factor behind a putative structural break in the effectiveness of monetary policy. To check for the existence of such a break without making prior assumptions about timing, and to enable comparison between pre- and post-break monetary policy, we employ an identified Markov switching VAR framework. Estimation results support the existence of a structural break around the time when the de-facto zero nominal interest rate policy was resumed and the effectiveness of monetary policy is seen to weaken since then although slightly positive effects from monetary easing still exist

Keywords: Markov Switching VAR; Monetary Policy (search for similar items in EconPapers)
JEL-codes: C33 C50 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (11)

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Journal Article: Evaluating monetary policy when nominal interest rates are almost zero (2006)
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