Measuring the natural yield curve

Michal Brzoza-Brzezina and Jacek Kotłowski

No 108, NBP Working Papers from Narodowy Bank Polski

Abstract: We generalize the concept of the natural rate of interest (Laubach and Williams, 2003; Woodford, 2003) by defining and estimating the the natural yield curve (NYC) - the term structure of natural interest rates. Our motivation stems i.a. from the observation that at times when central banks attempt to directly affect long-term interest rates (e.g. via quantitative easing) the gap between the short-term real and natural rate is no more a good indicator of the monetary policy stance. We estimate the NYC on US data, document its main properties and show i.a. that in the period 2008-2011 the NYC allows to better capture the US monetary policy stance than the short-term natural rate.

Keywords: Natural rate of interest; natural yield curve; unconventional monetary policy; Kalman filter (search for similar items in EconPapers)
JEL-codes: C32 E43 E52 (search for similar items in EconPapers)
Pages: 32
Date: 2012
New Economics Papers: this item is included in nep-mon
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Citations: View citations in EconPapers (1)

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Working Paper: Measuring the Natural Yield Curve (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:108

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