Model-Based Measures of ELB Risk

Taisuke Nakata

No 2017-08-23, FEDS Notes from Board of Governors of the Federal Reserve System (U.S.)

Abstract: The target range for the federal funds rate has increased a few times since its liftoff from the effective lower bound (ELB) in December 2015 and currently stands at 1 to 1-1/4 percent. According to standard macroeconomic models, ELB risk--how likely it is for the policy rate to be constrained by the ELB in the near- and medium-term future--has important implications for interest rate policy. In this note, I construct measures of ELB risk by combining survey-based projections of the U.S. economy with stochastic simulations of the FRB/US model, a large-scale model of the US economy maintained and made public by Federal Reserve staff, and I examine how the ELB risk measures have evolved in the past and how they are likely to evolve in the future.

Date: 2017-08-23
New Economics Papers: this item is included in nep-mon and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfn:2017-08-23

DOI: 10.17016/2380-7172.2058

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