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Measuring the natural yield curve


  • Michał Brzoza-Brzezina
  • Jacek Kotłowski


We generalize the concept of the natural rate of interest (Laubach and Williams, 2003; Woodford, 2003) by defining and estimating the natural yield curve (NYC) -- the term structure of natural interest rates. Our motivation stems i.a. from the observation that at times when central banks attempt to directly affect long-term interest rates (e.g. via quantitative easing) the gap between the short-term real and natural rate is no more a good indicator of the monetary policy stance. We estimate the NYC on US data, document its main properties and show i.a. that in the period 2008 to 2011 the NYC allows to better capture the US monetary policy stance than the short-term natural rate.

Suggested Citation

  • Michał Brzoza-Brzezina & Jacek Kotłowski, 2014. "Measuring the natural yield curve," Applied Economics, Taylor & Francis Journals, vol. 46(17), pages 2052-2065, June.
  • Handle: RePEc:taf:applec:v:46:y:2014:i:17:p:2052-2065
    DOI: 10.1080/00036846.2013.829204

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    References listed on IDEAS

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    Cited by:

    1. Kei Imakubo & Haruki Kojima & Jouchi Nakajima, 2015. "The natural yield curve: its concept and measurement," Bank of Japan Working Paper Series 15-E-5, Bank of Japan.

    More about this item

    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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy


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