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A Shadow Rate Model of Intermediate-Term Policy Rate Expectations

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Abstract

This note introduces a shadow rate term structure model based on OIS rates and surveys to quantify federal funds rate expectations and term premiums over horizons ranging from one month to five years. The model implies that term premiums vary over time and can be substantial in magnitude, even at relatively short horizons.

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  • Marcel A. Priebsch, 2017. "A Shadow Rate Model of Intermediate-Term Policy Rate Expectations," FEDS Notes 2017-10-04-1, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfn:2017-10-04-1
    DOI: 10.17016/2380-7172.2056
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    File URL: https://www.federalreserve.gov/econres/notes/feds-notes/shadow-rate-model-of-intermediate-term-policy-rate-expectations-20171004.htm
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    Cited by:

    1. Schupp, Fabian, 2020. "The (ir)relevance of the nominal lower bound for real yield curve analysis," Working Paper Series 2476, European Central Bank.
    2. Richard H. Clarida, 2019. "Models, Markets, and Monetary Policy : a speech at the Hoover Institution Monetary Policy Conference \"Strategies for Monetary Policy,\" Stanford University, Stanford, California, May 3, 201," Speech 1058, Board of Governors of the Federal Reserve System (U.S.).
    3. Lucas Marc Fuhrer & Basil Guggenheim & Matthias Jüttner, 2019. "A survey-based estimation of the Swiss franc forward term premium," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 155(1), pages 1-18, December.
    4. Michael Callaghan, 2017. "Is the market always right? Improving federal funds rate forecasts by adjusting for the term premium," Reserve Bank of New Zealand Analytical Notes series AN2017/08, Reserve Bank of New Zealand.

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