This paper assesses the macroeconomic consequences of a prolonged period of low and falling inflation when monetary policy is constrained by the zero lower bound (ZLB) on short-term nominal interest rates, the private sector is indebted in nominal terms (debt deflation mechanism) and nominal...

We propose a framework of optimal monetary policy where debt sustainability may, or may not, be a relevant constraint for the central bank. We show analytically that in each environment the optimal interest rate path consists of a Taylor rule augmented with forward guidance terms. These terms...

In this paper, we examine the effects of Czech monetary policy on the economy within VAR, structural VAR, and the Factor-Augmented VAR framework. We document a well-functioning transmission mechanism similar to the euro area countries, especially in terms of persistence of monetary policy...

This paper studies the state-dependent effects of monetary policy shocks. It shows that a canonical sticky-price model with real rigidity in the form of firm-specific factors can generate substantial state-dependence in the effects of monetary policy shocks. Factor specificity introduces a...

Recent developments in many industrialized countries have triggered a debate on whether monetary policy is effective when the nominal interest rate is close to zero. When the nominal interest rate hits its lower bound, the monetary authority is no longer in a position to pursue a policy of...

This paper investigates how different monetary policy regime switching types impact macroeconomic dynamics. Policy switches that either affect the inflation target or the response to inflation deviations from target lead to different determinacy regions and different output, inflation, and...

We shed new light on the effects of monetary policy shocks in the US. Gertler and Karadi (2015) suggest that movements in credit costs may result in substantial impact of monetary policy shocks on economic activity. Using the proxy SVAR framework, we show that once the Volcker disinflation...

In this paper, we revisit the debate on the effects of monetary policy shocks in the U.S. economy. In a recent study, Gertler and Karadi (2015) suggest that movements in credit costs help to capture the transmission mechanism of monetary policy to the aggregate economy through the credit...