The Empirical Implications of the Zero Lower Bound on the
Interest Rate: The Case of the Czech Economy

J 2016

The Empirical Implications of the Zero Lower Bound on the Interest Rate: The Case of the Czech Economy

HLOUŠEK, Miroslav

Basic information

Original name

The Empirical Implications of the Zero Lower Bound on the Interest Rate: The Case of the Czech Economy

Authors

HLOUŠEK, Miroslav (203 Czech Republic, guarantor, belonging to the institution)

Edition

Acta universitatis agriculturae et silviculturae Mendelianae Brunensis, Brno, Mendelova univerzita v Brně, 2016, 1211-8516

Other information

Language

English

Type of outcome

Article in a journal

Field of Study

50200 5.2 Economics and Business

Country of publisher

Czech Republic

Confidentiality degree

is not subject to a state or trade secret

References:

URL

RIV identification code

RIV/00216224:14560/16:00089844

Organization unit

Faculty of Economics and Administration

DOI

http://dx.doi.org/10.11118/actaun201664020603

EID Scopus

2-s2.0-84970024867

Keywords in English

zero lower bound on interest rate; DSGE model; occasionally binding constraint; monetary policy

Changed: 1/3/2018 08:00, Ing. Miroslav Hloušek, Ph.D.

Abstract

In the original language

This paper uses an estimated DSGE model of the Czech economy to study the macroeconomic implications of various shocks when the interest rate is constrained by the zero lower bound. The goal is to identify which shocks represent threats for the economy and how large the distortions are. The results show that four single shocks can take the economy to the zero lower bound, and that of the four, productivity shock in the tradable sector is the most dangerous. The consequences for the behaviour of macroeconomic variables are nontrivial and, quite naturally, increase with the size of the shock and the frequency of occurrence. If the economy is subject to all model specific shocks, there are distortions in terms of lower average values of output and consumption (by more than one percentage point) and higher inflation volatility (by more than six percentage points). To reduce these costs, the central bank should give higher weight to inflation and lower weight to the output gap in monetary policy rule.

Links

MUNI/A/1049/2015, interní kód MU

Name: Makroekonomická analýza chování ekonomiky a hospodářské politiky pomocí kvantitativních metod

Investor: Masaryk University, Category A

Cite

HLOUŠEK, Miroslav. The Empirical Implications of the Zero Lower Bound on the Interest Rate: The Case of the Czech Economy. Acta universitatis agriculturae et silviculturae Mendelianae Brunensis. Brno: Mendelova univerzita v Brně, 2016, vol. 64, No 2, p. 603-616. ISSN 1211-8516. Available from: https://dx.doi.org/10.11118/actaun201664020603.

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   author = {Hloušek, Miroslav},
   article_location = {Brno},
   article_number = {2},
   doi = {http://dx.doi.org/10.11118/actaun201664020603},
   keywords = {zero lower bound on interest rate; DSGE model; occasionally binding constraint; monetary policy},
   language = {eng},
   issn = {1211-8516},
   journal = {Acta universitatis agriculturae et silviculturae Mendelianae Brunensis},
   title = {The Empirical Implications of the Zero Lower Bound on the Interest Rate: The Case of the Czech Economy},
   url = {http://acta.mendelu.cz/64/2/0603/},
   volume = {64},
   year = {2016}
}

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KW  - occasionally binding constraint
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N2  - This paper uses an estimated DSGE model of the Czech economy to study the macroeconomic implications of various shocks when the interest rate is constrained by the zero lower bound. The goal is to identify which shocks represent threats for the economy and how large the distortions are. The results show that four single shocks can take the economy to the zero lower bound, and that of the four, productivity shock in the tradable sector is the most dangerous. The consequences for the behaviour of macroeconomic variables are nontrivial and, quite naturally, increase with the size of the shock and the frequency of occurrence. If the economy is subject to all model specific shocks, there are distortions in terms of lower average values of output and consumption (by more than one percentage point) and higher inflation volatility (by more than six percentage points). To reduce these costs, the central bank should give higher weight to inflation and lower weight to the output gap in monetary policy rule.
ER  -

HLOUŠEK, Miroslav. The Empirical Implications of the Zero Lower Bound on the Interest Rate: The Case of the Czech Economy. \textit{Acta universitatis agriculturae et silviculturae Mendelianae Brunensis}. Brno: Mendelova univerzita v Brně, 2016, vol.~64, No~2, p.~603-616. ISSN~1211-8516. Available from: https://dx.doi.org/10.11118/actaun201664020603.

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