MONETARY POLICY WHEN THE ZERO LOWER BOUND IS WITHIN REACH: A SMOOTH TRANSITION REGRESSION APPROACH

The period of low interest rates since the global financial crisis provides a unique opportunity to examine monetary policy reaction functions near the zero lower bound (ZLB). Using smooth transition regressions for the Euro area and a panel of industrialized countries we show that central banks anticipate the ZLB by less aggressive policies in its vicinity while we do not find a significant difference between both regimes for the US.