Monetary Policy Expectations at the Zero Lower Bound

Michael Bauer and Glenn Rudebusch

No 2013-18, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: Obtaining monetary policy expectations from the yield curve is difficult near the zero lower bound (ZLB). Standard dynamic term structure models, which ignore the ZLB, can be misleading. Shadow-rate models are better suited for this purpose, because they account for the distributional asymmetry in projected short rates induced by the ZLB. Besides providing better interest rate fit and forecasts, our shadow-rate models deliver estimates of the future monetary policy liftoff from the ZLB that are closer to survey expectations. We also document significant improvements for inference about monetary policy expectations when macroeconomic factors are included in the term structure model.

Keywords: Monetary policy; Macroeconomics - Econometric models (search for similar items in EconPapers)
Pages: 45 pages
Date: 2013
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac, nep-mon and nep-spo
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Citations: View citations in EconPapers (27)

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Journal Article: Monetary Policy Expectations at the Zero Lower Bound (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2013-18

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DOI: 10.24148/wp2013-18

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