Replication data for: Escaping the Great Recession

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AER-Code			10/12/2019 05:57:AM
aer-code			10/12/2019 05:58:AM
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Project Citation:

Bianchi, Francesco, and Melosi, Leonardo. Replication data for: Escaping the Great Recession. Nashville, TN: American Economic Association [publisher], 2017. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E113122V1

Project Description

Summary: We show that policy uncertainty about how the rising public debt will be stabilized accounts for the lack of deflation in the US economy at the zero lower bound. We first estimate a Markov-switching VAR to highlight that a zero-lower-bound regime captures most of the comovements during the Great Recession: a deep recession, no deflation, and large fiscal imbalances. We then show that a microfounded model that features policy uncertainty accounts for these stylized facts. Finally, we highlight that policy uncertainty arises at the zero lower bound because of a trade-off between mitigating the recession and preserving long-run macroeconomic stability.

Scope of Project

JEL Classification:
      E31 Price Level; Inflation; Deflation
      E32 Business Fluctuations; Cycles
      E52 Monetary Policy
      E62 Fiscal Policy
      G01 Financial Crises
      H63 National Debt; Debt Management; Sovereign Debt

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Published Versions

V1 [2019-10-12]

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DDI 2.5

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