Measuring the Stance of Monetary Policy in Zero Lower Bound Environments

13 Pages Posted: 19 Jul 2012 Last revised: 7 Aug 2012

Date Written: July 18, 2012

Abstract

I propose a simple framework that quantifies the stance of monetary policy as a 'shadow short rate' when the term structure is near the zero lower bound. I demonstrate my framework with a one-factor model applied to Japanese data, including an intuitive economic interpretation of the results, and also discuss the extension to multiple factors.

Keywords: zero lower bound, shadow short rate, term structure model

JEL Classification: E43, G12, G13

Suggested Citation

Krippner, Leo, Measuring the Stance of Monetary Policy in Zero Lower Bound Environments (July 18, 2012). CAMA Working Paper No. 35/2012, 25th Australasian Finance and Banking Conference 2012, Available at SSRN: https://ssrn.com/abstract=2112758 or http://dx.doi.org/10.2139/ssrn.2112758

Leo Krippner (Contact Author)

Reserve Bank of New Zealand ( email )

2 The Terrace
PO Box 2498
Wellington, 6140
New Zealand

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