Shadow rates as a measure of the monetary policy stance: Some international evidence

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.     

Forward-Looking Belief Elicitation Enhances Intergenerational Beneficence

Environmental and Resource Economics - One of the challenges in managing the Earth’s common pool resources, such as a livable climate or the supply of safe drinking water, is to motivate...     

Gender preference gaps and voting for redistribution

Experimental Economics - There is substantial evidence that women tend to support different policies and political candidates than men. Many studies also document gender differences in a variety of...     

The welfare implications of COVID-19 for fragile and conflict-affected regions

Understanding the ramifications of the COVID-19 pandemic for households' welfare in regions subject to fragility, conflict, and violence (FCV) is important to inform programs and policies in this context. Harmonized data from high-frequency phone surveys indicates that, at the onset of the pandemic, a higher fraction of respondents in FCV regions relative to non-FCV ones faced adverse household income changes and reported to have stopped working since the outbreak of the crisis. On top of that, households in FCV regions were far less likely to have received government assistance than those in non-FCV regions. These findings suggest that, at the start of the COVID-19 pandemic, there was a widening of the preexisting economic gap between FCV and non-FCV regions, raising the recovery bar for the former.