Measuring the stance of monetary policy in conventional and unconventional environments

Leo Krippner

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This article introduces an idea for summarizing of the stance of monetary policy with quantities derived from a class of yield curve models that respect the zero lower bound constraint for interest rates. The “economic stimulus measure” aggregates the current and estimated expected path of interest rates relative to the neutral interest rate from the yield curve model. Unlike shadow short rates, economic stimulus measures are consistent and comparable across conventional and unconventional monetary policy environments, and are less subject to variation with modelling choices, as I demonstrate with two and three factor models estimated with different data sets. Full empirical testing of the inter-relationships between ES measures and macroeconomic data remains a topic for future work.

Keywords: Unconventional monetary policy; zero lower bound; shadow short rate; term structure model (search for similar items in EconPapers)
JEL-codes: E43 E52 G12 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2014-01
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2014-06

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