Shadow rates as a measure of the monetary policy stance
Some international evidence
Bibliographic Data
| ID | 10492906 |
|---|---|
| Authors | Christina Anderl (0000-0001-6770-6698, London South Bank University London UK), Guglielmo Maria Caporale (0000-0002-0144-4135, Brunel University London Uxbridge UK, corresponding author) |
| Year | 2022 |
| Volume | 70 |
| Issue | 5 |
| Pages | 399-422 |
| Publication date | 2022-12-21 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Scottish Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0036-9292 • E-ISSN: 1467-9485 |
| Publisher | Wiley (PUBLISHER • GB) |
| DOI | 10.1111/sjpe.12343 |
| OpenAlex | W4313524083 |
| Language | EN |
| References cited | 23 |
This paper examines the usefulness of shadow rates to measure the monetary policy stance by comparing them to the official policy rates and those implied by three types of Taylor rules in both inflation‐targeting countries (the UK, Canada, Australia and New Zealand) and others that have only targeted inflation at times (the United States, Japan, the Euro Area and Switzerland) over the period from the early 1990s to December 2021. Shadow rates estimated from a dynamic factor model are shown to suggest a much looser policy stance than either the official policy rates or those implied by the Taylor rules, and generally to provide a more accurate picture of the monetary policy stance during both ZLB and non‐ZLB periods, since they reflect the full range of unconventional policy measures used by central banks. Furthermore, generalised impulse response analysis based on three alternative vector autoregression (VAR) models indicates that monetary shocks based on the shadow rates are more informative than those related to the official policy rates or to two‐ and three‐factor shadow rates, especially during the Global Financial Crisis and the recent COVID‐19 pandemic, when unconventional measures have been adopted. Finally, unconventional policy shocks seem to have less persistent effects on the economy in countries, which have adopted an inflation‐targeting regime
Central bank · Economics · Inflation (cosmology · Inflation targeting · Interest rate · Macroeconomics · Monetary economics · Monetary policy · Shadow (psychology · Taylor rule · Vector autoregression · Zero lower bound · Global Financial Crisis and Policies · Market Dynamics and Volatility · Monetary Policy and Economic Impact
Discretion versus policy rules in practice
Postwar U.S. Business Cycles
Generalized impulse response analysis in linear multivariate models
Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound
Determining the Number of Factors in Approximate Factor Models
The Effects of Monetary Policy Shocks
A Quasi–Maximum Likelihood Approach for Large, Approximate Dynamic Factor Models
| Highly cited | No |
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