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Accepted in JMCB: Shadow rates and the long-run level of the real rate

posted May 10, 2018, 12:02 AM by Elmar Mertens   [ updated Nov 10, 2019, 3:14 AM ]

Together with my former Board colleague Ben Johannsen, we revised our work on estimating the long-run level of the real rate from a time-series model with shadow rates. In the revised version we also estimate the effects of monetary policy shocks identified from shadow-rate surprises

 

NEWLY REVISED working paper: pdf; accepted for publication by the JMCB.

Slides for a talk are here: pdf

Here are estimates of the trend level (and uncertainty around the trend estimates) as well as a model-implied measure of the current real rate:



Here we illustrate the construction of non-linear impulse-responses from the actual rate (responses of macro variables can be found in the paper):
 


Part of an earlier version of this work was also featured in the Board’s Monetary Policy Report to the Congress released on Feb 10, 2016, see pages 32-33 of the report and a FEDS note.

   



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