‘Shadow policy rate' measures Fed monetary policy stance at ZLB

BIS economists invent tool to measure policy stance at the zero lower bound

federal reserve
Federal Reserve

Two BIS economists have come up with a ‘shadow policy rate' to measure the Federal Reserve's monetary policy stance when its policy rate is at the zero lower bound, using "a large set of data representing the various facets of the US Federal Reserve's policy stance".

In A shadow policy rate to calibrate US monetary policy at the zero lower bound, Marco Lombardi and Feng Zhu document how their shadow policy rate "tracks the effective federal funds rate very closely before the recent crisis", but

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