This paper studies whether dynamic term structure models for US nominal bond yields should enforce the zero lower bound by a quadratic policy rate or a shadow rate specification. We address the question by estimating quadratic term structure models (QTSMs) and shadow rate models (SRMs) with at...

We use a no-arbitrage shadow rate term structure model to estimate investors' views about the timing of monetary policy ‘lift-off' in the United Kingdom over time. Our estimates show that when the UK policy rate was first cut to 0.5%, in March 2009, investors believed that it would remain at...

We estimate a New Keynesian model with matching frictions and nominal wage rigidities on UK data. We are able to identify important structural parameters, recover the unobservable shocks that have affected the UK economy since 1971 and study the transmission mechanism. With matching frictions,...

This paper re-examines the evolution of the US monetary transmission mechanism using an empirical framework that incorporates substantially more information than the standard tri-variate VAR model used in most previous studies. In particular, we employ an extended version of a factor-augmented...

This paper carries out a systematic investigation into the possibility of structural shifts in the UK economy using a Markov-switching dynamic stochastic general equilibrium (DSGE) model. We find strong evidence for shifts in the structural parameters of several equations of the DSGE model. In...

This paper develops a DSGE model which explains variation in the nominal and real term structure along with inflation surveys and four macro variables in the UK economy. The model is estimated based on a third-order approximation to allow for time-varying term premia. We find a fall in nominal...

This paper analyses the conduct of monetary policy in an environment where households' desire to amass precautionary savings is influenced by fluctuations in the volatilities of disturbances that hit the economy. It uses a simple New Keynesian model with external habit formation that is...

A large empirical literature has examined the transmission mechanism of structural shocks in great detail. The possible role played by changes in the volatility of shocks has largely been overlooked in vector autoregression based applications. This paper proposes an extended vector...

Using publicly available data for a group of 20 OECD countries, we find that the cyclical volatility of the unemployment rate exhibits substantial cross-country and time variation. We then investigate empirically whether labour market institutions can account for this observed heterogeneity and...

Recent monetary policy experience suggests a simple test for models of monetary non-neutrality. Suppose the central bank pegs the nominal interest rate below steady state for a reasonably short period of time. Familiar intuition suggests that this should be inflationary. We pursue this simple...