EconPapers    
Economics at your fingertips  
 

A time series model of interest rates with the effective lower bound

Benjamin K Johannsen and Elmar Mertens ()

No 715, BIS Working Papers from Bank for International Settlements

Abstract: Modeling nominal interest rates requires their effective lower bound (ELB) to be taken into account. We propose a flexible time series approach that includes a "shadow rate" - a notional rate identical to the actual nominal rate except when the ELB binds. We apply this approach to a trend-cycle decomposition of interest rates and macroeconomic variables that generates competitive interest-rate forecasts. Our estimates of the real-rate trend have edged down somewhat in recent decades, but not significantly so. We identify monetary policy shocks from shadow-rate surprises and find that they were particularly effective at stimulating economic activity during the ELB period.

Keywords: shadow rate; effective lower bound; trend real rate; monetary policy shocks; bayesian time series (search for similar items in EconPapers)
JEL-codes: C32 C34 C53 E43 E47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets, nep-mac and nep-mon
Date: 2018-04
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.bis.org/publ/work715.pdf Full PDF document (application/pdf)
https://www.bis.org/publ/work715.htm (text/html)

Related works:
Working Paper: A Time Series Model of Interest Rates With the Effective Lower Bound (2016) Downloads
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:bis:biswps:715

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Christian Beslmeisl ().

 
Page updated 2019-04-08
Handle: RePEc:bis:biswps:715