I show that the zero lower bound (ZLB) on interest rates can be used to identify the causal effects of monetary policy. Identification depends on the extent to which the ZLB limits the efficacy of ...monetary policy. I propose a simple way to test the efficacy of unconventional policies, modeled via a “shadow rate.” I apply this method to U.S. monetary policy using a three-equation structural vector autoregressive model of inflation, unemployment, and the Federal Funds rate. I reject the null hypothesis that unconventional monetary policy has no effect at the ZLB, but find some evidence that it is not as effective as conventional monetary policy.
The winner of the Festival of Dionysus in 409 BC, 'Philoctetes' describes the attempt by Neoptolemus and Odysseus to bring disabled master archer, Philoctetes, with them to Troy. The play covers ...several deep, contentious themes, including moral relativity, trauma, love vs. hatred, and friendship vs. enmity.
I revisit the question of indeterminacy in US monetary policy using limited-information identification-robust methods. I find that the conclusions of Clarida, Galí, and Gernter (2000) that policy was ...inactive before 1979 are robust, but the evidence over the Volcker-Greenspan periods is inconclusive. I show that this is in fact consistent with policy being active over that period. Problems of identification also arise because policy reaction has been more gradual recently. At a methodological level, the paper demonstrates that identification issues should be taken seriously, and that identification-robust methods can be informative even when they produce wide confidence sets. (E31, E32, E52, E65,)
•Models with no solution are incoherent; with multiple solutions are incomplete.•Models with occasionally binding constraints are not generically coherent.•Coherency needs restrictions on parameters ...or on the support of shock distributions.•These restrictions generally cause incompleteness.•The NK model is incoherent under typical parameterizations, but UMP can help.
Structural models with no solution are incoherent, and those with multiple solutions are incomplete. We show that models with occasionally binding constraints are not generically coherent. Coherency requires restrictions on the parameters or on the support of the distribution of the shocks. In presence of multiple shocks, the support restrictions cannot be independent from each other, so the assumption of orthogonality of structural shocks is incompatible with coherency. Models whose coherency is based on support restrictions are generically incomplete, admitting a very large number of minimum state variable solutions.
The field of international business is fundamentally concerned with the implications of managerial actions that affect multinational risk and performance outcomes. While portfolio diversification and ...real options theory are often used to describe the outcomes of multinational investment, existing work often confuses the actions and predictions proposed by these theories. This is concerning, as the two theories emphasize different causal mechanisms, managerial actions, and conceptions of risk and performance. Whereas portfolio theory argues that passive management affects symmetric outcomes, such as variance in returns by attaining a well-diversified portfolio, real options theory posits that managers actively shift subsidiary resources to affect asymmetric outcomes, such as upside potential or downside risk by monitoring and responding to environmental changes affecting the portfolio. This paper disentangles these two theories by focusing on unique predictions from real options theory – that geographic dispersion of MNE activities is associated with asymmetric outcomes, that this association is contingent on management being aware of real options logic, and that these effects are moderated by the degree of market uncertainty. Our findings confirm these predictions and suggest differences in the types of managerial strategies and actions required to effectively implement these distinct theories of the MNE.
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