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Transition from the Taylor rule to the zero lower bound

Transition from the Taylor rule to the zero lower bound AbstractThis paper examines the Taylor rule in the context of United States monetary policy since 1965, particularly with respect to the zero-lower-bound era of the federal funds rate from 2009 to 2016. A nonlinear Taylor rule is developed which features smooth transitions in the first two moments of the federal funds rate. This flexible specification is found to usefully capture observed nonlinearity, while accounting for the well-documented structural changes in monetary policy formation at the Federal Reserve in the last 50 years, and especially in the recent zero-lower-bound era. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Studies in Nonlinear Dynamics & Econometrics de Gruyter

Transition from the Taylor rule to the zero lower bound

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Publisher
de Gruyter
Copyright
© 2021 Walter de Gruyter GmbH, Berlin/Boston
ISSN
1558-3708
eISSN
1558-3708
DOI
10.1515/snde-2019-0102
Publisher site
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Abstract

AbstractThis paper examines the Taylor rule in the context of United States monetary policy since 1965, particularly with respect to the zero-lower-bound era of the federal funds rate from 2009 to 2016. A nonlinear Taylor rule is developed which features smooth transitions in the first two moments of the federal funds rate. This flexible specification is found to usefully capture observed nonlinearity, while accounting for the well-documented structural changes in monetary policy formation at the Federal Reserve in the last 50 years, and especially in the recent zero-lower-bound era.

Journal

Studies in Nonlinear Dynamics & Econometrics – de Gruyter

Published: Dec 1, 2022

Keywords: liquidity trap; regime switching; smooth transition; structural change; unconventional monetary policy; C22; C51; C54

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