IDEAS home Printed from https://ideas.repec.org/a/fip/fedfel/00131.html
   My bibliography  Save this article

R-star, Uncertainty, and Monetary Policy

Author

Listed:
  • Kevin J. Lansing

Abstract

Investors? demand for safe assets tends to increase when there?s more uncertainty, as in recessions. Consistent with this idea, short-term movements in the natural rate of interest, or r-star, are negatively correlated with an index of macroeconomic uncertainty. This relationship may be relevant for assessing monetary policy. An estimated policy rule that incorporates both r-star and the uncertainty index can largely reproduce the path of the federal funds rate since 1988, except during periods when policy was constrained by the zero lower bound.

Suggested Citation

  • Kevin J. Lansing, 2017. "R-star, Uncertainty, and Monetary Policy," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00131
    as

    Download full text from publisher

    File URL: http://www.frbsf.org/economic-research/files/el2017-16.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Olivier Coibion & Yuriy Gorodnichenko, 2011. "Monetary Policy, Trend Inflation, and the Great Moderation: An Alternative Interpretation," American Economic Review, American Economic Association, vol. 101(1), pages 341-370, February.
    2. Lukasz Rachel & Thomas Smith, 2015. "Secular Drivers of the Global Real Interest Rate," Discussion Papers 1605, Centre for Macroeconomics (CFM).
    3. John B. Taylor, 1999. "A Historical Analysis of Monetary Policy Rules," NBER Chapters, in: Monetary Policy Rules, pages 319-348, National Bureau of Economic Research, Inc.
    4. Francois Gourio & Jonas Fisher, 2015. "Risk Management for Monetary Policy at the Zero Lower Bound," 2015 Meeting Papers 665, Society for Economic Dynamics.
    5. Charles Evans & Jonas Fisher & Francois Gourio & Spencer Krane, 2015. "Risk Management for Monetary Policy Near the Zero Lower Bound," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(1 (Spring), pages 141-219.
    6. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lansing, Kevin J., 2021. "Endogenous forecast switching near the zero lower bound," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 153-169.
    2. Christopher J. Gust & Benjamin K. Johannsen & J. David López-Salido, 2015. "Monetary Policy, Incomplete Information, and the Zero Lower Bound," Finance and Economics Discussion Series 2015-99, Board of Governors of the Federal Reserve System (U.S.).
    3. Lael Brainard, 2015. "Normalizing Monetary Policy When the Neutral Interest Rate Is Low: a speech at the Stanford Institute for Economic Policy Research, Stanford, California, December 1, 2015," Speech 882, Board of Governors of the Federal Reserve System (U.S.).
    4. Efrem Castelnuovo, 2022. "Uncertainty Before and During COVID-19: A Survey," "Marco Fanno" Working Papers 0279, Dipartimento di Scienze Economiche "Marco Fanno".
    5. Efrem Castelnuovo, 2019. "Domestic and Global Uncertainty: A Survey and Some New Results," Melbourne Institute Working Paper Series wp2019n13, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    6. Juan Carlos Berganza & Pedro del Río & Fructuoso Borrallo, 2016. "Determinants and implications of low global inflation rates," Occasional Papers 1608, Banco de España.
    7. Efrem Castelnuovo, 2019. "Yield Curve and Financial Uncertainty: Evidence Based on US Data," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 52(3), pages 323-335, September.
    8. Seneca, Martin, 2016. "Risk shocks close to the zero lower bound," Bank of England working papers 606, Bank of England.
    9. Hills, Timothy S. & Nakata, Taisuke & Schmidt, Sebastian, 2019. "Effective lower bound risk," European Economic Review, Elsevier, vol. 120(C).
    10. Caggiano, Giovanni & Castelnuovo, Efrem & Nodari, Gabriela, 2018. "Risk management-driven policy rate gap," Economics Letters, Elsevier, vol. 171(C), pages 235-238.
    11. Thomas Gomez & Giulia Piccillo, 2023. "Does U.S. Monetary Policy Respond to Macroeconomic Uncertainty?," CESifo Working Paper Series 10407, CESifo.
    12. John C. Williams, 2015. "The economic outlook: live long and prosper," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    13. Caggiano, Giovanni & Castelnuovo, Efrem & Kima, Richard, 2020. "The global effects of Covid-19-induced uncertainty," Economics Letters, Elsevier, vol. 194(C).
    14. Semyon Malamud & Andreas Schrimpf, 2016. "Intermediation Markups and Monetary Policy Passthrough," Swiss Finance Institute Research Paper Series 16-75, Swiss Finance Institute.
    15. Delano S. Villanueva, 2015. "Challenges for Inflation Targeting," Working Papers wp10, South East Asian Central Banks (SEACEN) Research and Training Centre.
    16. Billi, Roberto M., 2018. "Price level targeting and risk management," Economic Modelling, Elsevier, vol. 73(C), pages 163-173.
    17. Kohei Hasui & Tomohiro Sugo & Yuki Teranishi, 2016. "Liquidity Trap and Optimal Monetary Policy Revisited," UTokyo Price Project Working Paper Series 061, University of Tokyo, Graduate School of Economics.
    18. Spencer D. Krane & Leonardo Melosi & Matthias Rottner, 2023. "Learning Monetary Policy Strategies at the Effective Lower Bound with Sudden Surprises," Working Paper Series WP 2023-22, Federal Reserve Bank of Chicago.
    19. Ales Marsal & Katrin Rabitsch & Lorant Kaszab, 2023. "Undesired Consequences of Calvo Pricing in a Non-linear World," Working and Discussion Papers WP 1/2023, Research Department, National Bank of Slovakia.
    20. Giovanni Caggiano & Efrem Castelnuovo & Gabriela Nodari, 2020. "Uncertainty and monetary policy in good and bad times: A Replication of the VAR investigation by Bloom (2009)," CAMA Working Papers 2020-74, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedfel:00131. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Federal Reserve Bank of San Francisco Research Library (email available below). General contact details of provider: https://edirc.repec.org/data/frbsfus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.