We generalize the concept of the natural rate of interest (Laubach i Williams, 2003; Woodford, 2003) by defining and estimating the the natural yield curve (NYC) - the term structure of natural interest rates. Our motivation stems i.a. from the observation that at times when central banks attempt to directly affect long-term interest rates (e.g. via quantitative easing) the gap between the short-term real and natural rate is no more a good indicator of the monetary policy stance. We used the Nelson-Siegel approach to model the natural yield curve. Using a framework similar to Laubach i Williams (2003) we show how to estimate the NYC on US data. We show that the gap between the real and natural curves has an impact on the output gap and inflation. Furthermore we demonstrate how, in contrast to the short-term interest rate gap, our gap is able to document the expansionary stance of the Fed's monetary policy during and after the financial crisis.
