Arbeitspapier
Below the zero lower bound: a shadow-rate term structure model for the euro area
We propose a shadow-rate term structure model for the euro area yield curve from 1999 to mid-2015, when bond yields had turned negative at various maturities. Yields in the model are constrained by a lower bound, but - as a special feature of our specification - the bound is allowed to change over time. We estimate that it has first ranged marginally above zero, but has decreased to -11 bps in September 2014. We derive the impact of a changing lower bound on the yield curve and interpret the impact of the September 2014 ECB rate cut from this perspective. Our model matches survey forecasts of short rates and the decline in yield volatility during the low-rate period better than a benchmark affine model. We estimate that since mid-2012 the horizon when short rates are expected to exceed 25 bps again has ranged between 18 and 62 months.
- ISBN
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978-92-899-2710-9
- Language
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Englisch
- Bibliographic citation
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Series: ECB Working Paper ; No. 1991
- Classification
-
Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Interest Rates: Determination, Term Structure, and Effects
Monetary Policy
- Subject
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lower bound
monetary policy expectations
nonlinear state space model
term structure of interest rates
- Event
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Geistige Schöpfung
- (who)
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Lemke, Wolfgang
Vladu, Andreea Liliana
- Event
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Veröffentlichung
- (who)
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European Central Bank (ECB)
- (where)
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Frankfurt a. M.
- (when)
-
2017
- DOI
-
doi:10.2866/823439
- Handle
- Last update
-
10.03.2025, 11:45 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Lemke, Wolfgang
- Vladu, Andreea Liliana
- European Central Bank (ECB)
Time of origin
- 2017
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Ben Bernanke and the zero bound
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Monetary policy at the zero lower bound
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