SVARs with occasionally-binding constraints

We develop a structural VAR in which an occasionally-binding constraint generates censoring of one the dependent variables. Once mechanism is triggered, we allow some coefficients for remaining variables to change. show that necessary condition unique reduced form regression functions non-censored are continuous at point and parameters satisfy mild restrictions. In our application censored variable nominal interest rate constrained by effective lower bound (ELB). According estimates based on U.S. data, once ELB becomes binding, inflation equation change significantly, translates into responses (unconventional) monetary policy demand shocks. Our results suggest presence indeed empirically relevant propagation also obtain shadow shows significant accommodation early phase Great Recession, followed steady until liftoff 2016.