The Effectiveness of Unconventional Monetary Policy Tools at the Zero Lower Bound: A DSGE Approach

• Název práce v češtině: Účinnost nekonvenční měnové politiky na nulové spodní hranici úrokových sazeb: využití DSGE přístupu
• Název v anglickém jazyce: The Effectiveness of Unconventional Monetary Policy Tools at the Zero Lower Bound: A DSGE Approach
• Klíčová slova: měnová politika, nulová spodní hranice, past likvidity, nekonvenční nástroje, DSGE modely
• Klíčová slova anglicky: monetary policy, zero lower bound, liquidity trap, unconventional tools, DSGE models
• Akademický rok vypsání: 2012/2013
• Typ práce: diplomová práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: doc. Mgr. Tomáš Holub, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 10.04.2013
• Datum zadání: 21.05.2013
• Datum a čas obhajoby: 24.06.2014 00:00
• Místo konání obhajoby: ies
• Datum odevzdání elektronické podoby: 15.05.2014
• Datum proběhlé obhajoby: 24.06.2014
• Oponenti: Mgr. Václav Franče, M.A.

Seznam odborné literatury

1. Benigno, P & M. Woodford (2004): „Inflation Stabilization and Welfare: The Case Of a Distorted Steady State." NBER Working Papers 10838, National Bureau of Economic Research.
2. Chen, H., Cúrdia V. & A. Ferrero (2011): „The Macroeconomic Effects of Large-Scale Asset Purchase Programs.“ Working Paper Series 2012-22, Federal Reserve Bank of San Francisco.
3. Christiano L. J., Eichenbaum, M. & Ch. L. Evans (2005): „Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy.“ Journal of Political Economy 113(1): pp. 1-45.
4. Cúrdia, V. & M. Woodford (2010): „The Central-Bank Balance Sheet as an Instrument of Monetary Policy.“ NBER Working Papers 16208, National Bureau of Economic Research.
5. Eggertsson, G. & M. Woodford (2003): „The Zero Bound on Interest Rates and Optimal Monetary Policy.“ Brookings Papers on Economic Activity 34(1): pp. 139-235.
6. Galí, J. (2008): „Monetary policy, inflation, and the business cycle: an introduction to the new Keynesian framework.“ Princeton University Press.
7. Gertler, M. & P. Karadi (2009): „A Model of Unconventional Monetary Policy.“ Journal of Monetary Economics 58(1): pp. 17-34.
8. McCallum, B. T. (2000): „Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates." NBER Working Papers 7677, National Bureau of Economic Research.
9. Svensson, L. E. O. (2003): „Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others.“ NBER Working Papers 10195, National Bureau of Economic Research.
10. Woodford, M. (2003): „Interest and Prices: Foundations of a Theory of Monetary Policy.“ Princeton University Press.

Předběžná náplň práce

The thesis will assess the implications of monetary policy tools when the zero lower bound is binding. The thesis attempts to address the issue of effectiveness of different unconventional policy tools. The thesis will be divided into three main parts. Firstly, the current literature on this issue will be explored and main approaches to modeling unconventional policy tools within DSGE models will be outlined. It will be focused mainly on quantitative easing, FX interventions and management of expectations. Secondly, the benchmark DSGE model for a small open economy will be constructed and calibrated for the Czech Republic. In this situation, the monetary authority is able to pursue a policy of monetary easing by lowering nominal interest rates. The zero lower bound constraint will then be introduced as binding and the monetary authority will not be able to reduce nominal interest rates, therefore, it will not avoid the liquidity trap. Thirdly, individual unconventional policy tools will be implemented into this model. Then the results of the enhanced model will be compared with the results of the benchmark model. Impulse response functions for various shocks as well as model implications and detailed discussion will be provided.

1. Approaches to modeling unconventional policy tools
a. Quantitative easing
b. Different targeting rules
c. FX market interventions
2. The benchmark NK model
a. Basic NK model for a small open economy
b. Calibration for the Czech Republic
c. Introducing ZLB constraint as binding
3. Implementing unconventional policy tools
4. Comparison of effectiveness of unconventional policy tools
5. Discussion
6. Conclusion

Předběžná náplň práce v anglickém jazyce

The thesis will assess the implications of monetary policy tools when the zero lower bound is binding. The thesis attempts to address the issue of effectiveness of different unconventional policy tools. The thesis will be divided into three main parts. Firstly, the current literature on this issue will be explored and main approaches to modeling unconventional policy tools within DSGE models will be outlined. It will be focused mainly on quantitative easing, FX interventions and management of expectations. Secondly, the benchmark DSGE model for a small open economy will be constructed and calibrated for the Czech Republic. In this situation, the monetary authority is able to pursue a policy of monetary easing by lowering nominal interest rates. The zero lower bound constraint will then be introduced as binding and the monetary authority will not be able to reduce nominal interest rates, therefore, it will not avoid the liquidity trap. Thirdly, individual unconventional policy tools will be implemented into this model. Then the results of the enhanced model will be compared with the results of the benchmark model. Impulse response functions for various shocks as well as model implications and detailed discussion will be provided.

1. Approaches to modeling unconventional policy tools
a. Quantitative easing
b. Different targeting rules
c. FX market interventions
2. The benchmark NK model
a. Basic NK model for a small open economy
b. Calibration for the Czech Republic
c. Introducing ZLB constraint as binding
3. Implementing unconventional policy tools
4. Comparison of effectiveness of unconventional policy tools
5. Discussion
6. Conclusion