Tsinghua PBCSF Seminar (Nov. 29, 2023): James Morley, Professor, University of Sydney: A Structural Measure of the Shadow Federal Funds Rate

Time: 2023-11-28 15:57 Print

Topic: A Structural Measure of the Shadow Federal Funds Rate

Speaker: James Morley, Professor of Macroeconomics, School of Economics, University of Sydney

Time: 10:00am-11:30am, November 29

Location: 4-101


We propose a shadow policy interest rate based on an estimated structural model that accounts for the zero lower bound. The lower bound constraint, if expected to bind, is contractionary and increases the shadow rate compared to an unconstrained systematic policy response. By contrast, forward guidance and other unconventional policies that extend the expected duration of zero-interest-rate policy are expansionary and decrease the shadow rate. By quantifying these distinct effects, our ‘structural’ shadow federal funds rate better captures the stance of monetary policy for given economic conditions than a shadow rate based only on the term structure of interest rates.

Speaker Biography:

James Morley is Professor of Macroeconomics at the University of Sydney and Co-Director of the "Global Perspectives on Economic Policy" initiative for the Faculty of Arts & Social Sciences. He is a Fellow of the International Association for Applied Econometrics and a member of the ARC College of Experts. His research is on the empirical analysis of business cycles, stabilization policy, and sources of persistent changes in macroeconomic and financial conditions.