We explain why the macroeconomic effects of shocks to inflation of the same size, but opposite sign, are not necessarily symmetric. All in all, the costs of deflation and disinflation tend to exceed those of inflation due to the presence of constraints in the economy, namely the zero lower bound...

We describe the joint dynamics of bond yields, monetary policy and macroeconomic variables within a no-arbitrage affine term structure framework while explicitly modeling the zero lower bound (ZLB) using the shadow rate methodology. We include data on the unemployment gap and inflation to build...

Forward guidance provides monetary policy communication for an economy at the effective lower bound (ELB). In this paper, we consider both calendar- and outcome-based forward guidance about the timing of liftoff. We develop a novel macro-finance shadow rate term structure model by introducing...