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FEDS Note on Shadow Rates and the Long-run Level of the Real Rate

posted Feb 10, 2016, 6:27 PM by Elmar Mertens   [ updated Jan 14, 2019, 7:44 AM ]

Together with my Board colleague Ben Johannsen, we just finished a FEDS note describing the latest version of our work on estimating shadow rates from time-series models. 

Part of this work is also featured in the Board’s Monetary Policy Report to the Congress that has just been released on Feb 10, 2016, see pages 32-33 of the report.



Since last summer we have made the model dynamics more general and are conditioning our estimates not only on macroeconomic aggregates and the federal funds rate, but also on a longer-term interest rate, which (unsurprisingly) provides a particularly useful signal about for inference about the path for short-term interest rates near the effective lower bound.


There is also a longer FEDS Working Paper, describing the underlying model, estimation method as well as additional results: pdf (FEDS),

and a NEWLY REVISED working paper: pdf (this site).

Slides for a talk are here: pdf

Here are slides for a shorter talk: pdf