← Search

Are Supply Shocks Contractionary at the ZLB? Evidence from Utilization-Adjusted TFP Data

Julio Garín¹; Robert Lester²; Eric Sims³

¹ Claremont McKenna College · ² Colby College · ³ University of Notre Dame and NBER

Abstract The basic New Keynesian model predicts that positive supply shocks are less expansionary at the zero lower bound (ZLB) compared to periods of active monetary policy. We test this prediction empirically using Fernald's (2014) utilization-adjusted total factor productivity series, which we take as a measure of exogenous productivity. In contrast to the predictions of the model, positive productivity shocks are estimated to be more expansionary at the ZLB compared to normal times. We find that there is no significant difference in the response of expected inflation to a productivity shock at the ZLB compared to normal times.

DOI

10.1162/rest_a_00723

Volume

101 (1)

Pages

160-175

Language

en

Export

BibTeX

Sources

openalex crossref