A Survey-based Shadow Rate and Unconventional Monetary Policy Effects

Hibiki Ichiue (hichiue@gmail.com) and Yoichi Ueno
Additional contact information
Yoichi Ueno: Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: youichi.ueno@boj.or.jp)

No 18-E-05, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: Many studies estimate a shadow interest rate, which can be negative when the short-term rate is at the effective lower bound, and use it as the monetary policy indicator. This study proposes a novel method to estimate the shadow rate using survey forecasts of macroeconomic variables and allowing the shadow rate to be negative even when the short-term rate is positive. The estimated U.S. shadow rate remained negative in 2015-17, when the Federal Reserve continued to hike its policy rate but kept its holdings of assets at sizable levels. The shadow spread, which is defined as the shadow rate minus the short-term rate, is negatively correlated with the Federal Reserve's holdings of assets, particularly mortgage-backed securities. The impact of the unconventional monetary policy on inflation was 0.5 percentage points at its peak.

Keywords: Monetary Policy; Effective Lower Bound; Zero Lower Bound; Shadow Rate; Survey Forecasts (search for similar items in EconPapers)
JEL-codes: E52 (search for similar items in EconPapers)
Date: 2018-06
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 (7)

Downloads: (external link)
https://www.imes.boj.or.jp/research/papers/english/18-E-05.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ime:imedps:18-e-05

Access Statistics for this paper

More papers in IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan Contact information at EDIRC.
Bibliographic data for series maintained by Kinken (imes.journals-info@boj.or.jp).