Unconventional monetary policy during financial crisis challenges traditional models.
After the financial crisis, the Federal Reserve had to change how it analyzed monetary policy. They couldn't use the usual models because interest rates were stuck at zero. Researchers looked at different ways to measure the impact of monetary policy, like using the size of the balance sheet. They found that a "shadow rate" could be a good substitute for the usual interest rate during this time. However, the traditional model didn't work well during the zero lower bound period.