Hello. I’m trying to estimate linear DSGE and linear NK models with the zero lower bound in the sample. In this case, using a federal funds rate data pose any issues for estimation? Because the rate remained near zero for an extended period, I’m concerned it might affect the model’s estimation. Are there additional considerations or modifications I should take into account to handle this effectively?
You need to provide more context. How are you dealing with the ZLB? Using OccBin? Or just ignore it? You also may want to use the shadow rate instead of the federal funds rate when working with empirical data.