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...

We propose an approach to estimating structural models in which the central bank holds the policy rate fixed for an extended period of the estimation sample. Embedding this policy in a version of the Smets and Wouters (2007) model that incorporates information from the yield curve to help with...