Estimating the Expected Duration of the Zero Lower Bound in DSGE Models with Forward Guidance

Mariano Kulish, James Morley and Tim Robinson

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: Motivated by the increasing use of forward guidance, we consider DSGE models in which the central bank holds the policy rate fixed for an extended period of time. Private agents’ beliefs about how long the fixed-rate regime will last influences current output and inflation. We estimate the structural for US data and infer the expected duration of the zero lower bound regime. Our results suggest that the average expected duration is around 3 quarters and has varied significantly since the onset of the zero lower bound regime, with changes that can be related to the Federal Reserve’s forward guidance.

Keywords: Zero lower bound; forward guidance (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 36pp
Date: 2014-07
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Estimating the expected duration of the zero lower bound in DSGE models with forward guidance (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2014n16

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