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Measures of the stance of US and international monetary policy

This research into United States monetary policy involves developing and applying yield curve models with an explicit allowance for the zero lower bound constraints. It is by award-winning economist, Leo Krippner, who was formerly employed in our Economics department.

Measures of the stance of US monetary policy

Estimated monetary policy measures

The United States monetary policy measures file contains estimated daily, month-end and monthly average estimates of three different summary measures of the stance of monetary policy for the United States:

  1. the shadow short rate (SSR)
  2. the expected time to zero (ETZ)
  3. the effective monetary stimulus (EMS).

Download the United States monetary policy measures data (XLSX 3 MB)

The overview and documentation of how the estimates are produced is covered by the following section, and Figure 1 plots the monthly averages for the United States.

Figure 1: US monetary policy measures

Note: The left panels of figure 1 contain the estimates over the entire sample, with NBER recessions indicated with shading. The right panels are from 2007, therefore highlighting the lower-bound period. Major unconventional monetary policy events are indicated as down arrows for easing and up arrows for tightening, and the progressive tapering of QE3 is indicated from the first tapering announcement to the announcement of the program’s termination. The ETZ and EMS scales have been inverted for ease of comparing movements between the different measures.

Comparison of international monetary policy measures

Estimated monetary policy measures

The international shadow short rates file contains daily, month-end and monthly average shadow short rate (SSR) estimates for the United States (US), euro area, Japan and the United Kingdom (UK).

Download the International shadow short rates (XLSX 1MB)

Note that the US SSR results in this section (that is, the Comparison of international monetary policy measures) are estimated using a different dataset than the results for the section above (Measures of the stance of US monetary policy). This is for better comparison with the results for the other economies.

The overview and documentation of how the estimates are produced is contained in the following section, and figure 1 plots the monthly averages.

Figure 2: Shadow short rate measures

Notes: The left panels of figure 1 contain the estimates over the entire sample. The right panels are from late 2007, therefore highlighting the lower-bound period. Major unconventional monetary policy events for the US are indicated as down arrows for easing and up arrows for tightening, and the progressive tapering of QE3 is indicated from the first tapering announcement to the announcement of the program’s termination.

Overview and documentation

For comparability, all of the estimates are obtained using the Krippner (2011–2015) shadow/lower bound framework with two factors; that is, the K-ANSM(2), a fixed 12.5 basis point lower bound, and yield curve data with maturities from 0.25 to 30 years, with the sample beginning in 1995.

This link provides further details and discusses how to interpret the different measures.

Download the Documentation for United States measures of monetary policy – May 2016 (PDF 239 KB)

SSR estimates can be very sensitive to the model specification, data and estimation method. The results presented here are designed to be as comparable as possible by holding each of those aspects consistent between applications.

In addition, SSR results from different K-ANSM(2) applications are robust in profile, relatively robust in magnitude and correspond well with unconventional monetary policy events. These properties do not generally hold for SSR estimates from 3-factor models, which includes K-ANSM(3) models and the Wu and Xia (2016) model.

This link and the historical documentation in the following section contains further details.

Download A comment on Wu and Xia (2015), and the case for 2-factor shadow short rates (PDF 815 KB)

The SSR estimates are all nominal, and so accounting for changes in inflation expectations would be required to gauge changes in the real stance of policy. The profile of the Japanese results in particular will be influenced by this aspect, because the inflation target and core inflation have both increased since early 2013.

Historical estimates and documentation

The historical United States monetary policy measures file contains the historical estimates, for reference, before improvements were made to the model in May 2016. An overview of the changes and their impact are available in Appendix B of the May 2016 documentation.

Download the Historical United States monetary policy measures (XLSX 3.4 MB)

The September 2014 documentation details the original model.

Download the Documentation for United States measures of monetary policy – September 2014 (PDF 611 KB)

Code for lower-bound term structure modeling

The MatLab code zip file contains the MatLab code and files that have been used since May 2016 to obtain the results published on the website.

Leo Krippner recommends using this code for estimating shadow short rates, and it can be run with a fixed or an estimated lower bound.

It also contains the MatLab code and files used to estimate the six main models detailed in Krippner (2015), Zero lower bound term structure modeling: A practitioner’s guide. The six different models are:

  • K-ANSM(2) with a fixed lower bound (of 0% and 0.25%)
  • K-ANSM(2) with an estimated lower bound (which was used to obtain the previous results available in the sections above
  • K-ANSM(3) with a fixed lower bound (of 0% and 0.25%)
  • K-ANSM(3) with an estimated lower bound.

Download the MatLab code zip file (ZIP 8 MB)

The documentation for United States measures of monetary policy September 2014 provides an overview of the model specifications used in Krippner (2015).

Download the Documentation for United States measures of monetary policy – September 2014 (PDF 607 KB)

The July 2016 documentation provides an overview of the modified model specifications, and also how to run both the original MatLab code and the current MatLab code.

Download the Documentation for United States measures of monetary policy – July 2016 (PDF 1.2 MB)

Python code page

The Python code page contains the Python code equivalent to the original MatLab code.

Python code

Disclaimer

The data above were produced from Leo Krippner's research and are not official Reserve Bank of New Zealand data. Neither he nor the Reserve Bank of New Zealand accepts any liability for any damages arising from use of the code or files.

The data is old and has not been updated since it was first released.