Economics, Econometrics and Finance
8 years ago

New study reveals hidden impact of zero interest rates on economy

RePEc: Research Papers in Economics
Measuring Monetary Policy Under Zero Interest Rates With a Dynamic Stochastic General Equilibrium Model: An Application of a Particle Filter
Tomiyuki Kitamura

Paper Summary

The article presents a way to measure how effective monetary policy is when interest rates are at zero. They use a model that includes a "shadow rate" to show the true impact of interest rates. By analyzing Japanese data, they found that the shadow rate was significantly below zero during a period when nominal interest rates were at zero in the early 2000s.

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