Working Paper

How Effective is Monetary Policy at the Zero Lower Bound? Identification Through Industry Heterogeneity

Abstract: US monetary policy was constrained from 2008 to 2015 by the zero lower bound, during which the Federal Reserve would likely have lowered the federal funds rate further if it were able to. This paper uses industry-level data to examine how growth was affected. Despite the zero bound constraint, industries historically more sensitive to interest rates, such as construction, performed relatively well in comparison to industries not typically affected by monetary policy. Further evidence suggests that unconventional policy lowered the effective stance of policy below zero.

Keywords: Industry heterogeneity; Unconventional monetary policy; Zero lower bound;

JEL Classification: E32; E43; E47; E52;

https://doi.org/10.17016/FEDS.2017.073

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2017-07-07

Number: 2017-073

Pages: 58 pages