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Inferring the Shadow Rate from Real Activity

Benjamin Garcia () and Arsenios Skaperdas ()

No 2017-106, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (US)

Abstract: We estimate a shadow rate consistent with the paths of time series capturing real activity. This allows us to quantify the real effects of unconventional monetary policy in terms of equivalent short-term interest rate movements. We find that large-scale asset purchases and forward guidance had significant real effects equivalent of up to a four percent reduction in the federal funds rate.

Keywords: External instrument VAR; Kalman filter; Unconventional monetary policy; Effective lower bound; Shadow rate (search for similar items in EconPapers)
JEL-codes: E43 E47 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
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DOI: 10.17016/FEDS.2017.106

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