The effects of quasi-random monetary experiments / Òscar Jordà, Moritz Schularick, Alan M. Taylor.

Format:

Book

Author/Creator:

Jordà, Òscar.

Contributor:

National Bureau of Economic Research.

Schularick, Moritz.

Taylor, Alan M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23074.

NBER working paper series no. w23074

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

The trilemma of international finance explains why interest rates in countries that fix their exchange rates and allow unfettered cross-border capital flows are largely outside the monetary authority's control. Using historical panel-data since 1870 and using the trilemma mechanism to construct an external instrument for exogenous monetary policy fluctuations, we show that monetary interventions have very different causal impacts, and hence implied inflation-output trade-offs, according to whether: (1) the economy is operating above or below potential; (2) inflation is low, thereby bringing nominal rates closer to the zero lower bound; and (3) there is a credit boom in mortgage markets. We use several adjustments to account for potential spillover effects including a novel control function approach. The results have important implications for monetary policy.

Notes:

Print version record

January 2017.