A comment on Wu and Xia (2016) from a macroeconomic perspective

Leo Krippner

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Counter to the comments in Wu and Xia (2016), I show that the results from macroeconomic models are sensitive to the Shadow Short Rate (SSR) series used. That is, using a standard small macroeconomic vector autorregression model with a range of estimated SSR series obtains counterfactuals for unemployment ranging from 0.4 to 1.8 percentage points, if the Federal Funds Rate rather than the SSR series had been applied in the lower bound period. The counterfactuals for inflation range from -0.2 to -2.2 percentage points. Vetting the various SSR series from several perspectives indicates that some are more preferable than others, but there are reasons to remain cautious on the associated results.

Keywords: shadow rates; lower bound; term structure models; unconventional monetary policy (search for similar items in EconPapers)
JEL-codes: E43 G12 G13 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2017-06
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2017-41

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