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Estimates of the US Shadow-Rate

Author

Listed:
  • Alfaro, Rodrigo
  • Piña, Marco

Abstract

This article provides several estimates for the shadow rate (SR) of the short-term interest rate in US. We assume maximal models with two and three Gaussian factors, and we use forward rates to estimate the model’s parameters. Based on that, we conclude that point estimates of SR should be taken with caution because they depend on the characteristics of the data set, including the sample size, maturities, and smoothness. The latter is even more crucial than other settings discussed previously in the literature, such as the number of factors.

Suggested Citation

  • Alfaro, Rodrigo & Piña, Marco, 2023. "Estimates of the US Shadow-Rate," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 4(1).
    • Handle: RePEc:eee:lajcba:v:4:y:2023:i:1:s2666143822000345
    DOI: 10.1016/j.latcb.2022.100080
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    References listed on IDEAS

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    More about this item

    Keywords

    Shadow rate; Gaussian factors; Extended Kalman filter; Forward rates;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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