2020/12/30 by Daisuke Ikeda, Ikeda, Daisuke, Shangshang Li +5 · 1 citation
Economics, Econometrics and Finance · #FOS: Economics and business #Fiscal Policies and Political Economy #General Economics (econ.GN) #Market Dynamics and Volatility #Monetary Policy and Economic Impact
paper · doi:10.48550/arxiv.2012.15158
openalex publication_date 2020/12/30 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
Unconventional monetary policy (UMP) may make the effective lower bound (ELB) on the short-term interest rate irrelevant. We develop a theoretical model that underpins our empirical test of this `irrelevance hypothesis' based on the simple idea that under the hypothesis, the short rate can be excluded in any empirical model that accounts for alternative measures of monetary policy. We test the hypothesis for Japan and the United States using a structural vector autoregressive model with the ELB. We firmly reject the hypothesis but find that UMP has had strong delayed effects.