Fed adviser sets out new equilibrium rate model

A Federal Reserve paper proposes a new method for estimating short-run values of the long-run equilibrium interest rate, using the 10-year Treasury yield.

Author John Roberts, a Fed adviser, focuses on long-term interest rates, in contrast to many other models, which build their estimates around short-term interest rates.

“While monetary policy-makers traditionally use short-term interest rates as their policy instrument, in the wake of the financial crisis, policy-makers were constrained by