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International Spillovers of Unconventional Monetary Policy

  • Topic: International Spillovers of Unconventional Monetary Policy
  • Speaker:

    A/Professor Mariano Kulish (University of NSW)

  • Venue:E4A - 523 Seminar Room
  • When: 28th April, 2016, (Thu)
  • Time: 11:00 am - 12:00 pm (morning tea starts at 10:30 am)


We study and measure how forward guidance of the United States Federal Funds rate at its zero lower bound affects monetary policy and the dynamics of a small open economy. To do so, we set up and estimate a two-country open economy model on US and Canadian data from 1984Q1 to 2014Q4. Using piecewise linear solution methods, we jointly estimate the model's structural parameters and the expected durations of the fixed nominal interest rate regimes in the US and Canada at each quarter from 2009Q1. We decompose the estimated durations into a component implied by the constraint itself and an additional one which we interpret as calendar-based forward guidance. The results strongly support the existence of international spillovers of US forward guidance. Using the model, we conduct counterfactuals and find that without forward guidance in the US, monetary policy in Canada would not have been as constrained by its effective lower bound because its exchange rate would have appreciated significantly less.

About the Speaker:

Mariano Kulish is an Associate Professor at UNSW. Before joining UNSW, he was a Senior Research Manager at the Reserve Bank of Australia and have a PhD from Boston College.


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