Estimating monetary reaction functions at near zero interest rates

The importance of truncated distributions for bias in estimation is demonstrated for a Japanese policy reaction function. Due to the proximity of a zero lower bound (ZLB) on interest rates, coefficient estimates can be biased upwards. This paper illustrates the importance of measuring and correcting estimates for this bias using Japan's unique experience of prolonged low inflation/deflation.

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Year of publication:	2010
Authors:	Kim, Tae-Hwan ; Mizen, Paul
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 106.2010, 1, p. 57-60
Publisher:	Elsevier
Keywords:	Monetary policy Zero lower bounds Japan Tobit

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008474069