Redefining monetary policy rules: A threshold approach
Entity
UAM. Departamento de Análisis Económico, Teoría Económica e Historia EconómicaPublisher
Public Library of ScienceDate
2021-05-28Citation
10.1371/journal.pone.0252316
PLoS One 16.5 (2021): e0252316
ISSN
1932-6203DOI
10.1371/journal.pone.0252316Funded by
Spanish Ministry of Economy, Industry and Competitiveness through the project ECO2015-65826-PEditor's Version
https://doi.org/10.1371/journal.pone.0252316Subjects
Unit-root tests; Inflation; EconomíaRights
© 2021 Diaz-Roldan et alAbstract
In this paper, we try to analyse the extent to which a redefinition of the monetary policy rule would help to avoid the zero-lower bound, as well as to explore the conditions needed to avoid that constraint. To that aim, we estimate the threshold values of the key variables of the policy rule: the inflation gap and the output gap. The threshold model allows us to know which are the turning points from which the relationship between the key variables and the interest rate revert. In the Eurozone countries, we have found that the inflation gap always contributes to increasing the nominal interest rate. On the contrary, the output gap works differently when it reaches values above or below the threshold value, which would favour the reduction of the interest rates towards the zero level
Files in this item
Google Scholar:Diaz-Roldan, Carmen
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Prats, María A.
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Ramos Herrera, María del Carmen
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