Uncertainty and monetary policy in the US: A journey into nonlinear territory

This paper investigates the interaction between uncertainty and monetary policy by estimating a non-linear VAR with US post-WWII data. The indicator is treated both as an endogenous variable in transition discriminating high vs. low states. impact of shocks different phases cycle assessed via computation Generalized Impulse Response Functions. Monetary are found to be less effective when high, peak reactions battery real variables being about two-thirds milder than those conditional on initially level uncertainty. framework then put at work investigate effects presence Zero Lower Bound. drop rebound response documented Bloom (2009) present only if rate long way from its ZLB. Conversely, shock occurring economy near ZLB triggers longer-lasting recessions does not lead any significant rebound. JEL-codes: C32, E32, E52, E61