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Estimating a Nonlinear New Keynesian Model with the Zero Lower Bound for Japan

Hirokuni Iiboshi, Mototsugu Shintani and Kozo Ueda

No e154, Working Papers from Tokyo Center for Economic Research

Abstract: Which type of monetary policy rule best describes the policy conducted by the Bank of Japan during the period when the nominal interest rate is constrained at the zero lower bound (ZLB)? What are the economic fundamentals that explain Japan's prolonged stagnation? How important is incorporating nonlinearities in the analysis? We answer these questions by estimating a small-scale nonlinear DSGE model. We find that: the Bank of Japan conducted a threshold-based forward guidance policy; adverse demand shocks explain Japan's experience; and nonlinear models are very useful in the analysis of the Japanese economy during the ZLB period.

Pages: 50 pages
Date: 2020-12
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
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https://www.tcer.or.jp/wp/pdf/e154.pdf (application/pdf)

Related works:
Journal Article: Estimating a Nonlinear New Keynesian Model with the Zero Lower Bound for Japan (2022) Downloads
Working Paper: Estimating a nonlinear new Keynesian model with the zero lower bound for Japan (2018) Downloads
Working Paper: Estimating a Nonlinear New Keynesian Model with a Zero Lower Bound for Japan (2018) Downloads
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