3 Works

Should Central Banks Worry About Nonlinearities of their Large-Scale Macroeconomic Models?

Vadym Lepetyuk, Lilia Maliar & Serguei Maliar
How wrong could policymakers be when using linearized solutions to their macroeconomic models instead of nonlinear global solutions? This question became of much practical interest during the Great Recession and the recent zero lower bound crisis. We assess the importance of nonlinearities in a scaled-down version of the Terms of Trade Economic Model (ToTEM), the main projection and policy analysis model of the Bank of Canada. In a meticulously calibrated “baby” ToTEM model with 21...

Business Cycles in Small, Open Economies: Evidence from Panel Data Between 1900 and 2013

Wataru Miyamoto & Thuy Lan Nguyen
Using a novel data set for 17 countries dating from 1900 to 2013, we characterize business cycles in both small developed and developing countries in a model with financial frictions and a common shock structure. We estimate the model jointly for these 17 countries using Bayesian methods. We find that financial frictions are an important feature for not only developing countries but also small developed countries. Furthermore, business cycles in both groups of countries are...

Government Spending Multipliers Under the Zero Lower Bound: Evidence from Japan

Wataru Miyamoto, Thuy Lan Nguyen & Dmitriy Sergeyev
Using a rich data set on government spending forecasts in Japan, we provide new evidence on the effects of unexpected changes in government spending when the nominal interest rate is near the zero lower bound (ZLB). The on-impact output multiplier is 1.5 in the ZLB period, and 0.6 outside of it. We estimate that government spending shocks increase both private consumption and investment during the ZLB period but crowd them out in the normal period....

Registration Year

  • 2021

Resource Types

  • Text


  • Santa Clara University
  • Bank of Canada
  • Stanford University
  • Bocconi University