The Zero Lower Bound and Endogenous Uncertainty

Bibliographic Data

ID9720713
AuthorsMichael Plante (0000-0003-0604-105X, Federal Reserve Bank of Dallas), Alexander W Richter (0000-0003-2876-9615, Federal Reserve Bank of Dallas and Auburn University), Nathaniel A Throckmorton (0000-0002-9671-757X, College of William and Mary)
Year2018
Volume128
Issue611
Pages1730-1757
Publication date2018-06-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/ecoj.12445
OpenAlexW3121286023
LanguageEN
Citations received4
References cited44

This paper documents a strong negative correlation between macroeconomic uncertainty and real GDP growth since the Great Recession. Prior to that event the correlation was weak, even when conditioning on recessions. At the same time, many central banks reduced their policy rate to its zero lower bound (ZLB), which we contend contributed to the strong correlation between macroeconomic uncertainty and real GDP growth. To test that theory, we use a model where the ZLB occasionally binds. The model roughly matches the correlation in the data?away from the ZLB the correlation is weak but strongly negative when the ZLB binds

Correlation · Econometrics · Economics · Great recession · Keynesian economics · Monetary policy · Negative correlation · Recession · Zero (linguistics · Zero lower bound · Global Financial Crisis and Policies · Market Dynamics and Volatility · Mathematics · Monetary Policy and Economic Impact

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