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Estimating the Real Effects of Uncertainty Shocks at the Zero Lower Bound

Giovanni Caggiano (), Efrem Castelnuovo () and Giovanni Pellegrino

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

Abstract: We employ a parsimonious nonlinear Interacted-VAR to examine whether the real effects of uncertainty shocks are greater when the economy is at the Zero Lower Bound. We find the contractionary effects of uncertainty shocks to be statistically larger when the ZLB is binding, with differences that are economically important. Our results are shown not to be driven by the contemporaneous occurrence of the Great Recession and high financial stress, and to be robust to different ways of modeling unconventional monetary policy. These findings lend support to recent theoretical contributions on the interaction between uncertainty shocks and the stance of monetary policy.

Keywords: Uncertainty shocks; Nonlinear Structural Vector AutoRegressions; Interacted VAR; Generalized Impulse Response Functions; Zero Lower Bound (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Pages: 56pp
Date: 2017-01
New Economics Papers: this item is included in nep-mac
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http://melbourneinstitute.unimelb.edu.au/downloads ... series/wp2017n01.pdf (application/pdf)

Related works:
Working Paper: Estimating the Real Effects of Uncertainty Shocks at the Zero Lower Bound (2018) Downloads
Journal Article: Estimating the real effects of uncertainty shocks at the Zero Lower Bound (2017) Downloads
Working Paper: Estimating the real effects of uncertainty shocks at the zero lower bound (2017) Downloads
Working Paper: Estimating the Real Effects of Uncertainty Shocks at the Zero Lower Bound (2017) Downloads
Working Paper: Estimating the Real Effects of Uncertainty Shocks at the Zero Lower Bound (2015) Downloads
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