Changing Macroeconomic Dynamics at the Zero Lower Bound

Liu, Philip L.‐F.; Theodoridis, Konstantinos; Mumtaz, Haroon; Zanetti, Francesco

doi:10.1080/07350015.2017.1350186

Cited by 78 publications

(89 citation statements)

References 59 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…the Great Moderation), attributing those changes to the conduct of monetary policy in the Volcker era or the Zero Lower Bound period (e.g. Liu et al, 2018), or the magnitude of exogenous shocks (e.g. Justiniano and Primiceri, 2008).…”

Section: Introductionmentioning

confidence: 99%

State Dependence in Labor Market Fluctuations

Pizzinelli

Theodoridis

Zanetti

2020

Int Economic Review

Self Cite

View full text Add to dashboard Cite

This paper documents state dependence in labor market fluctuations. Using a Threshold Vector Autoregression model (TVAR), we establish that the unemployment rate, the job separation rate, and the job finding rate exhibit a larger response to productivity shocks during periods with low aggregate productivity. A Diamond-Mortensen-Pissarides model with endogenous job separation and on-the-job search replicates these empirical regularities well. We calibrate the model to match the standard deviation of the job-transition rates explained by productivity shocks in the TVAR, and show that the model explains 88 percent of the state dependence in the unemployment rate, 76 percent for the separation rate and 36 percent for the job finding rate. The key channel underpinning state dependence in both job separation and job finding rates is the interaction of the firm's reservation productivity level and the distribution of match-specific idiosyncratic productivity. Results are robust across several variations to the baseline model.

show abstract

Section: Introductionmentioning

confidence: 99%

State Dependence in Labor Market Fluctuations

Pizzinelli

Theodoridis

Zanetti

2020

Int Economic Review

Self Cite

View full text Add to dashboard Cite

show abstract

“…The same formulation has been used previously by, e.g., Andrés et al (2004), Falagiarda (2013), Harrison (2017), and Liu et al (2015). 7 The description of the budget constraint here omits adjustment costs in the real sector of the economy (price, wage, capital stock, and labour adjustment costs) that do not affect the first-order conditions for portfolio holdings and savings.…”

Section: Model Descriptionmentioning

confidence: 99%

“…In particular, households have a preference for holding a mix of short-term and long-term bonds, and deviations from the target value  for the ratio of long-term over short-term debt induce quadratic adjustment costs ( b  ). The same formulation of portfolio preferences or adjustment costs has been used previously by, for example, Andrés et al (2004), Falagiarda (2013), Harrison (2012), and Liu et al (2015). 21 Note that , is related to , the private consumption deflator in terms of input factors, by the formula:…”

Section: A11 Ricardian Householdsmentioning

confidence: 99%

The macroeconomic effects of quantitative easing in the euro area: Evidence from an estimated DSGE model

Hohberger

Priftis

Vogel

2019

Journal of Economic Dynamics and Control

View full text Add to dashboard Cite

This paper estimates an open-economy dynamic stochastic general equilibrium model with Bayesian techniques to analyse the macroeconomic effects of the European Central Bank's (ECB's) quantitative easing (QE) programme. Using data on government debt stocks and yields across maturities, we identify the parameter governing portfolio adjustment in the private sector. Shock decompositions suggest a positive contribution of ECB QE to annual euro area output growth and inflation in 2015-16 of up to 0.3 and 0.6 percentage points (pp) in the linearised version of the model. Allowing for an occasionally binding zerobound constraint by using piecewise linear solution techniques raises the positive impact to up to 0.7 and 0.8 pp. RésuméNous estimons, par des techniques bayésiennes, un modèle d'équilibre général dynamique et stochastique en économie ouverte afin d'analyser les effets macroéconomiques du programme d'assouplissement quantitatif de la Banque centrale européenne (BCE). À partir des données portant sur l'encours des titres d'État et les taux de rendement pour la gamme des échéances, nous évaluons le paramètre qui détermine les ajustements de portefeuilles dans le secteur privé. Les décompositions de chocs effectuées montrent qu'en zone euro, les mesures d'assouplissement quantitatif de la BCE auraient entraîné, en 2015-2016, des effets positifs sur la croissance annuelle de la production et sur l'inflation à hauteur de 0,3 et 0,6 point de pourcentage dans la version linéarisée du modèle. Lorsque nous permettons que la contrainte de la borne du zéro soit occasionnellement active au moyen de techniques de linéarisation, l'incidence favorable se chiffre respectivement à 0,7 et 0,8 point de pourcentage. Sujets : Modèles économiques; Taux d'intérêt; Transmission de la politique monétaire Codes JEL : E44, E52, E53, F41 Non-technical SummaryIn early 2015 the European Central Bank (ECB) joined the group of central banks that have implemented large-scale asset purchase programmes as unconventional policy measures. The ECB's quantitative easing (QE) programme, announced in January 2015, foresaw buying €60 billion of assets a month from March 2015 to September 2016, which in sum corresponds to circa 10% of annualised euro area (EA) gross domestic product (GDP). It has been continuously revised in both size and duration since then. This paper analyses the macroeconomic effects of the ECB's QE programme using a tworegion dynamic stochastic general equilibrium (DSGE) model for the EA and the rest of the world, estimated with Bayesian techniques. The estimation of the model is undertaken in an environment where the zero lower bound may be binding and to solve such models requires extending previous algorithms. QE is introduced into the model by adding a central bank balance sheet and distinguishing between short-term and long-term government debt. We use a formulation of a private-sector portfolio that allows for non-neutral effects of central bank purchase programmes due to imperfect substitutability between assets of different...

show abstract

“…The reports of the death of the Great Moderation have been greatly exaggerated. SeeLiu et al (2018) for updated evidence.…”

mentioning

confidence: 99%

Search Complementarities, Aggregate Fluctuations, and Fiscal Policy

Fernández-Villaverde

Mandelman

et al. 2019

SSRN Journal

Self Cite

View full text Add to dashboard Cite

We develop a quantitative business cycle model with search complementarities in the interfirm matching process that entails a multiplicity of equilibria. An active static equilibrium with strong joint venture formation, large output, and low unemployment can coexist with a passive static equilibrium with low joint venture formation, low output, and high unemployment. Changes in fundamentals move the system between the two static equilibria, generating large and persistent business cycle fluctuations. The volatility of shocks is important for the selection and duration of each static equilibrium. Sufficiently adverse shocks in periods of low macroeconomic volatility trigger severe and protracted downturns. The magnitude of government intervention is critical to foster economic recovery in the passive static equilibrium, while it plays a limited role in the active static equilibrium.

show abstract

Changing Macroeconomic Dynamics at the Zero Lower Bound

Cited by 78 publications

References 59 publications

State Dependence in Labor Market Fluctuations

State Dependence in Labor Market Fluctuations

The macroeconomic effects of quantitative easing in the euro area: Evidence from an estimated DSGE model

Search Complementarities, Aggregate Fluctuations, and Fiscal Policy

Contact Info

Product

Resources

About