US business cycle dynamics at the zero lower bound

Gregor Böhl and Felix Strobel
Authors registered in the RePEc Author Service: Gregor Boehl

No 65/2020, Discussion Papers from Deutsche Bundesbank

Abstract: Using a nonlinear Bayesian likelihood approach that fully accounts for the lower bound on nominal interest rates, we analyze US post-crisis macroeconomic dynamics and provide reference parameter estimates. We find that despite the attention received in the literature, neither the inclusion of financial frictions nor that of household heterogeneity improves the empirical fit of the standard model or its ability to provide a joint explanation for the post-2007 dynamics. Associated financial shocks mis-predict an increase in consumption. We illustrate that the common practice of omitting the ZLB period in the estimation severely distorts the analysis of the latest economic dynamics.

Keywords: Zero Lower Bound; Bayesian Estimation; Great Recession; Business Cycles (search for similar items in EconPapers)
JEL-codes: C11 C63 E31 E32 E44 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Working Paper: US Business Cycle Dynamics at the Zero Lower Bound (2020)
Working Paper: US business cycle dynamics at the zero lower bound (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:652020

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