Data and code for: Uncovering the Effects of the Zero Lower Bound with an Endogenous Financial Wedge
Principal Investigator(s): View help for Principal Investigator(s) Dan Cao, Georgetown University; Wenlan Luo, Tsinghua University; Guangyu Nie, Shanghai University of Finance and Economics
Version: View help for Version V1
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| code | 07/20/2021 09:47:PM | ||
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Project Citation:
Cao, Dan, Luo, Wenlan, and Nie, Guangyu. Data and code for: Uncovering the Effects of the Zero Lower Bound with an Endogenous Financial Wedge. Nashville, TN: American Economic Association [publisher], 2022. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2022-12-09. https://doi.org/10.3886/E139621V1
Project Description
Summary:
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We study the effects of the Zero Lower Bound (ZLB) on the severity of financial crises using an incomplete markets New Keynesian model with two occasionally binding constraints: a ZLB on the nominal interest rate and a borrowing constraint tied to an asset price. The model’s financial wedge corresponds to an endogenous multiplier on the borrowing constraint. Binding ZLB exacerbates financial crises through its interaction with the asset fire-sale vicious cycle, driving up the financial wedge. Our results offer a novel reinterpretation of the negligible effect of the ZLB in representative agent New Keynesian models with exogenous wedges.
Scope of Project
Subject Terms:
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Zero Lower Bound;
Fisherian Asset Price Deflation;
Global Solution
JEL Classification:
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C60 Mathematical Methods; Programming Models; Mathematical and Simulation Modeling: General
E20 Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data)
E30 Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
E40 Money and Interest Rates: General
E50 Monetary Policy, Central Banking, and the Supply of Money and Credit: General
G11 Portfolio Choice; Investment Decisions
C60 Mathematical Methods; Programming Models; Mathematical and Simulation Modeling: General
E20 Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data)
E30 Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
E40 Money and Interest Rates: General
E50 Monetary Policy, Central Banking, and the Supply of Money and Credit: General
G11 Portfolio Choice; Investment Decisions
Geographic Coverage:
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United States
Time Period(s):
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1952 – 2019
Collection Date(s):
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2018 – 2021
Universe:
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Non-financial corporate and non-corporate firms of the United States.
Data Type(s):
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aggregate data;
program source code
Methodology
Data Source:
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Board
of Governors of the Federal Reserve System (US), Nonfinancial
Corporate Business; Debt Securities and Loans, 1952-2019.
Board of Governors of the Federal Reserve System (US), Nonfinancial Noncorporate Business; Total Liabilities, 1952-2019.
Fernald, J. G. (2014). Data for: A quarterly, utilization-adjusted series on total factor productivity.
Gilchrist, S. and E. Zakrajsek (2019). Replication data for: Credit Spreads and Business Cycle Fluctuations. Nashville, TN: American Economic Association [publisher], 2012. Ann Arbor, MI:Inter-university Consortium for Political and Social Research [distributor], 2019-10-11. https://doi.org/10.3886/E112536V1.
U.S. Bureau of Economic Analysis, Gross Domestic Product, 1952-2019.
Shiller, R. J. (2005). Data for: Irrational Exuberance (2nd edition ed.). Princeton, N.J: Princeton University Press.
S&P Dow Jones Indices LLC, S&P/Case-Shiller U.S. National Home Price Index, 1987-2021.
Board of Governors of the Federal Reserve System (US), Nonfinancial Noncorporate Business; Total Liabilities, 1952-2019.
Fernald, J. G. (2014). Data for: A quarterly, utilization-adjusted series on total factor productivity.
Gilchrist, S. and E. Zakrajsek (2019). Replication data for: Credit Spreads and Business Cycle Fluctuations. Nashville, TN: American Economic Association [publisher], 2012. Ann Arbor, MI:Inter-university Consortium for Political and Social Research [distributor], 2019-10-11. https://doi.org/10.3886/E112536V1.
U.S. Bureau of Economic Analysis, Gross Domestic Product, 1952-2019.
Shiller, R. J. (2005). Data for: Irrational Exuberance (2nd edition ed.). Princeton, N.J: Princeton University Press.
S&P Dow Jones Indices LLC, S&P/Case-Shiller U.S. National Home Price Index, 1987-2021.
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