BoI paper uses shadow rates to measure influence of QE


A working paper published by the Bank of Italy uses the device of shadow interest rates to gauge the effect of unconventional monetary policies on exchange rates.

In Exchange rate dynamics and unconventional monetary policies: it’s all in the shadows, Andrea De Polis and Mario Pietrunti present an open-economy New Keynesian model. Their model replaces effective short-term interest rates with shadow rates. These rates, they argue, provide a better measure of the effects of monetary policy when

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