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Measuring the stance of monetary policy in zero lower bound environments

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  • Leo Krippner

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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.

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File URL: http://cama.crawford.anu.edu.au/pdf/working-papers/2012/352012.pdf
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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2012-35.

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Length: 13 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:een:camaaa:2012-35

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  1. Leo Krippner, 2012. "Measuring the stance of monetary policy in zero lower bound environments," CAMA Working Papers, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University 2012-35, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Kim, Don H. & Singleton, Kenneth J., 2012. "Term structure models and the zero bound: An empirical investigation of Japanese yields," Journal of Econometrics, Elsevier, Elsevier, vol. 170(1), pages 32-49.
  3. Vasicek, Oldrich, 1977. "An equilibrium characterization of the term structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 5(2), pages 177-188, November.
  4. Leo Krippner, 2012. "Modifying Gaussian term structure models when interest rates are near the zero lower bound," Reserve Bank of New Zealand Discussion Paper Series DP2012/02, Reserve Bank of New Zealand.
  5. Black, Fischer, 1995. " Interest Rates as Options," Journal of Finance, American Finance Association, American Finance Association, vol. 50(5), pages 1371-76, December.
  6. Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, Econometric Society, vol. 53(2), pages 385-407, March.
  7. Antulio N. Bomfim, 2003. "Interest rates as options: assessing the markets' view of the liquidity trap," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2003-45, Board of Governors of the Federal Reserve System (U.S.).
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Cited by:
  1. Leo Krippner, 2014. "Measuring the stance of monetary policy in conventional and unconventional environments," CAMA Working Papers, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University 2014-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Leo Krippner, 2012. "A model for interest rates near the zero lower bound: An overview and discussion," Reserve Bank of New Zealand Analytical Notes series, Reserve Bank of New Zealand AN2012/05, Reserve Bank of New Zealand.
  3. Leo Krippner, 2012. "Measuring the stance of monetary policy in zero lower bound environments," CAMA Working Papers, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University 2012-35, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  4. Jens H.E. Christensen & Glenn D. Rudebusch, 2013. "Estimating shadow-rate term structure models with near-zero yields," Working Paper Series, Federal Reserve Bank of San Francisco 2013-07, Federal Reserve Bank of San Francisco.
  5. Leo Krippner, 2013. "A tractable framework for zero lower bound Gaussian term structure models," Reserve Bank of New Zealand Discussion Paper Series DP2013/02, Reserve Bank of New Zealand.
  6. Leo Krippner, 2013. "Efficient Jacobian evaluations for estimating zero lower bound term structure models," CAMA Working Papers, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University 2013-77, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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