Testing the Effectiveness of Unconventional Monetary Policy in Japan and the United States

Daisuke Ikeda, Shangshang Li, Sophocles Mavroeidis and Francesco Zanetti
Additional contact information
Shangshang Li: Department of Economics, University of Oxford (E-mail: shangshang.li@economics.ox.ac.uk)

No 20-E-10, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: The effective lower bound (ELB) on a short term interest rate may not constrain a central bank's capacity to achieve its objectives if unconventional monetary policy (UMP) is powerful enough. We formalize this 'irrelevance hypothesis' using a dynamic stochastic general equilibrium model with UMP and test it empirically for the United States and Japan using a structural vector autoregressive model that includes variables subject to occasionally binding constraints. The hypothesis is strongly rejected for both countries. However, a comparison of the impulse responses to a monetary policy shock across regimes shows that UMP has had strong delayed effects in each country.

Keywords: Effective lower bound; unconventional monetary policy; structural VAR (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Related works:
Journal Article: Testing the Effectiveness of Unconventional Monetary Policy in Japan and the United States (2024)
Working Paper: Testing the effectiveness of unconventional monetary policy in Japan and the United States (2023)
Working Paper: Testing the effectiveness of unconventional monetary policy in Japan and the United States (2022)
Working Paper: Testing the effectiveness of unconventional monetary policy in Japan and the United States (2022)
Working Paper: Testing the Effectiveness of Unconventional Monetary Policy in Japan and the United States (2022)
Working Paper: Testing the effectiveness of unconventional monetary policy in Japan and the United States (2021)
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