Monetary policy effectiveness in the liquidity trap: a switching regimes approach

IF 1.8 3区经济学 Q2 ECONOMICS

Review of Keynesian Economics Pub Date : 2021-01-01 DOI:10.4337/ROKE.2021.01.07

Dimitris G. Kirikos

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引用次数: 4

Abstract

Liquidity trap economics seems to have fared particularly well on all counts of its predictions, in the aftermath of the 2008 global financial crisis. Therefore, in this paper we evaluate formally the effectiveness of unconventional monetary policy in a liquidity trap, based on data from Japan, the USA, and the eurozone over periods of liquidity trap conditions (1994–2018 for Japan and 2009–2018 for the USA and the eurozone). Under effective unconventional policies, changes in the base money-growth regime should be associated with similar regime changes in either inflation or investment expenditure growth and the estimation of a switching regimes model allows us to test whether significant joint regime shifts occur in the data. Also, a test of liquidity trap conditions is based on a discrepancy of regime shifts between growth rates of base money and broad money, since this implies a collapse of the money multiplier. Our findings show that drastic shifts in the growth rate of the monetary base do not produce similar behavior for the inflation rate, investment expenditure growth, and broad money growth, thus pointing to liquidity trap conditions and unconventional monetary policy ineffectiveness.

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流动性陷阱中的货币政策有效性:制度转换方法

在2008年全球金融危机之后，流动性陷阱经济学的所有预测似乎都表现得特别好。因此，在本文中，我们基于日本、美国和欧元区在流动性陷阱条件时期(日本为1994-2018年，美国和欧元区为2009-2018年)的数据，正式评估了流动性陷阱中非常规货币政策的有效性。在有效的非常规政策下，基础货币增长机制的变化应该与通胀或投资支出增长的类似机制变化相关联，对转换机制模型的估计使我们能够检验数据中是否发生了显著的联合机制变化。此外，对流动性陷阱条件的测试是基于基础货币和广义货币增长率之间制度变化的差异，因为这意味着货币乘数的崩溃。我们的研究结果表明，基础货币增长率的急剧变化不会对通货膨胀率、投资支出增长和广义货币增长产生类似的行为，从而指向流动性陷阱条件和非常规货币政策无效。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Review of Keynesian Economics ECONOMICS-

CiteScore

3.10

自引率

12.50%

发文量

期刊介绍： The Review of Keynesian Economics (ROKE) is dedicated to the promotion of research in Keynesian economics. Not only does that include Keynesian ideas about macroeconomic theory and policy, it also extends to microeconomic and meso-economic analysis and relevant empirical and historical research. The journal provides a forum for developing and disseminating Keynesian ideas, and intends to encourage critical exchange with other macroeconomic paradigms. The journal is dedicated to the development of Keynesian theory and policy. In our view, Keynesian theory should hold a similar place in economics to that held by the theory of evolution in biology. Many individual economists still work within the Keynesian paradigm, but intellectual success demands institutional support that can leverage those individual efforts. The journal offers such support by providing a forum for developing and sharing Keynesian ideas. Not only does that include ideas about macroeconomic theory and policy, it also extends to microeconomic and meso-economic analysis and relevant empirical and historical research. We see a bright future for the Keynesian approach to macroeconomics and invite the economics profession to join us by subscribing to the journal and submitting manuscripts.