With nominal interest rates currently at or near their zero lower bound (ZLB) in many major economies, it has become untenable to apply Gaussian affine term structure models (GATSMs) while ignoring their inherent non-zero probabilities of negative interest rates. In this article I modify GATSMs...

I propose a simple framework that quantifies the stance of monetary policy as a 'shadow short rate' when the term structure is near the zero lower bound. I demonstrate my framework with a one-factor model applied to Japanese data, including an intuitive economic interpretation of the results,...

Counter to the comments in Wu and Xia (2016), I show that the results from macroeconomic models are sensitive to the Shadow Short Rate (SSR) series used. That is, using a standard small macroeconomic vector autorregression model with a range of estimated SSR series obtains counterfactuals for...

I introduce the essential aspects of the eigensystem vector autoregression (EVAR), which allows VARs to be specified and estimated directly in terms of their eigensystem, using univariate examples for clarity. The EVAR guarantees non-explosive dynamics and, if included, non-redundant...

Shadow Short Rates (SSRs) estimated from shadow/lower-bound term structure models (SLMs) can be useful for monitoring of the stance of unconventional monetary policy and for quantitative analysis, but only if they are relatively robust. I show from several perspectives that SSRs from...

This paper quantifies the impact of monetary policy shocks on asset markets in the United States and gauges the usefulness of a shadow short rate as a measure of conventional and unconventional monetary policy shocks. Monetary policy surprises are found to have had a larger impact on asset...

Older version is available at: https://ssrn.com/abstract=2899670We investigate the effect of the “Effective Monetary Stimulus” (EMS) on German and euro-area macroeconomic variables using a small-scale vector autoregression (VAR). The EMS is obtained from yield curve data and survey data, and...

This article introduces an idea for summarizing of the stance of monetary policy with quantities derived from a class of yield curve models that respect the zero lower bound constraint for interest rates. The "economic stimulus measure" aggregates the current and estimated expected path of...

Faster extended Kalman filter estimations of zero lower bound models of the term structure are possible if the analytic properties of the Jacobian matrix for the measurement equation are exploited. I show that such results are straighforward to incorporate, at least in Monte-Carlo-based...

The Black framework offers a theoretically appealing way to model the term structure and gauge the stance of monetary policy when the zero lower bound of interest rates becomes constraining, but it is time consuming to apply using standard numerical methods. I outline a faster Monte Carlo...