A comment on Wu and Xia (2016) from a macroeconomic perspective

Counter to the comments in Wu and Xia (2016), I show that the results from
macroeconomic models are sensitive to the Shadow Short Rate (SSR) series used. That
is, using a standard small macroeconomic vector autorregression model with a range of
estimated SSR series obtains counterfactuals for unemployment ranging from 0.4 to 1.8
percentage points, if the Federal Funds Rate rather than the SSR series had been
applied in the lower bound period. The counterfactuals for inflation range from -0.2 to -
2.2 percentage points. Vetting the various SSR series from several perspectives
indicates that some are more preferable than others, but there are reasons to remain
cautious on the associated results.