We propose a shadow rate no-arbitrage DTSM with drifting trends to estimate the natural rate of interest. With the shadow rate reflecting overall financial market condition (Wu and Zhang (2019)), its long run forecast (in real term), defined as our natural rate, provides a useful measure against...

We generalize the arbitrage-free Nelson Siegel (AFNS) model to allow λt to vary over time. We find that the time-varying λt, which determines the relative factor loadings, typically reaches its local peak before starting to decline right before a recession. Through conducting extensive...