Estimates of the US Shadow-Rate

Rodrigo Alfaro and Marco Piña

Latin American Journal of Central Banking (previously Monetaria), 2023, vol. 4, issue 1

Abstract: This article provides several estimates for the shadow rate (SR) of the short-term interest rate in US. We assume maximal models with two and three Gaussian factors, and we use forward rates to estimate the model’s parameters. Based on that, we conclude that point estimates of SR should be taken with caution because they depend on the characteristics of the data set, including the sample size, maturities, and smoothness. The latter is even more crucial than other settings discussed previously in the literature, such as the number of factors.

Keywords: Shadow rate; Gaussian factors; Extended Kalman filter; Forward rates (search for similar items in EconPapers)
JEL-codes: C32 E43 E44 E50 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:lajcba:v:4:y:2023:i:1:s2666143822000345

DOI: 10.1016/j.latcb.2022.100080

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