Estimating Monetary Policy Rules When Nominal Interest Rates Are Stuck at Zero

Jinill Kim and Seth Pruitt ()

No 1502, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: Did the Federal Reserve's response to economic fundamentals change with the onset of the Global Financial Crisis? Estimation of a monetary policy rule to answer this question faces a censoring problem since the interest rate target has been set at the zero lower bound since late 2008. Surveys by forecasters allow us to sidestep the problem and to use conventional regressions and break tests. We nd that the Fed's in ation response has decreased and that the unemployment response has remained as strong, which suggests that the Federal Reserve's commitment to stable in ation has become weaker in the eyes of the professional forecasters.

Keywords: monetary policy; policy rule; zero lower bound; survey data; market perceptions; censoring; Tobit; Blue Chip survey (search for similar items in EconPapers)
JEL-codes: E53 E58 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Estimating Monetary Policy Rules When Nominal Interest Rates Are Stuck at Zero (2017)
Working Paper: Estimating Monetary Policy Rules When Nominal Interest Rates Are Stuck at Zero (2013)
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