The interest rate is generally considered as an important driver of macroeconomic investment characterised by a particular form of path dependency, "hysteresis". At the same time, the interest rate channel is a central ingredient of monetary policy transmission. In this context, we shed light on...

The paper analyzes the experience with unconventional measures to cope with the Zero Lower Bound. It argues that forward guidance and quantitative easing are the natural extension of optimal monetary policy within the New Keynesian Framework, facing a Lower Bound. Unconventional policy had...

We introduce a novel simulated certainty equivalent approximation (SCEQ) method for solving dynamic stochastic problems. Our examples show that SCEQ can quickly solve high-dimensional finite- or infinite-horizon, stationary or non- stationary dynamic stochastic problems with hundreds of state...

The celebrated Taylor rule provides a simple formula that aims to capture how the central bank interest rate is adjusted as a linear function of inflation and output gap. However, the rule does not take explicitly into account the zero lower bound on the interest rate. Prior studies on interest...

Seit Ausbruch der Finanzkrise haben Zentralbanken weltweit versucht, dem wirtschaftlichen Abschwung mit zum Teil unkonventionellen Maßnahmen entgegenzuwirken. Dieser Beitrag fasst einerseits die Maßnahmen der EZB zusammen und zeigt dabei auf, dass die EZB weniger unkonventionell als andere...

Das Umfeld niedriger Zinsen ist weniger auf die Geldpolitik, sondern mehr auf globale Trends in der Investitionsnachfrage und in der Sparneigung sowie einen krisenbedingten Rückgang der Investitionen zurückzuführen. Mittelfristig kann die Überwindung der Bilanzrezession zu höheren...

We show an example of a small open economy - the Czech Republic - where the fiscal restriction was put in place between 2010 and 2013 in a negative output gap and zero lower bound on nominal interest rates. According to our results, such fiscal policy seems to have been mistaken, as the...

We propose a new approach to analyze economic shocks. Our new procedure identifies economic shocks as exogenous shifts in a function; hence, we call them "functional shocks." We show how to identify such shocks and how to trace their effects in the economy via VARs using "VARs with functional...

Existing methods for estimating nonlinear dynamic models are either highly computationally costly or rely on local approximations which often fail adequately to capture the nonlinear features of interest. I develop a new method, the discretization filter, for approximating the likelihood of...

This paper provides a quantitative assessment of equity options priced at the Zero Lower Bound, i.e., when interest rates are set essentially to zero. We obtain closed form formulas for American options when the Zero Lower Bound policy holds. We perform numerical implementation of American put...