The Drivers of r*: Accounting for Treasuries' Convenience Yield
SSRN Electronic Journal
2024
- 417Usage
- 2Captures
Metric Options: Counts1 Year3 YearSelecting the 1-year or 3-year option will change the metrics count to percentiles, illustrating how an article or review compares to other articles or reviews within the selected time period in the same journal. Selecting the 1-year option compares the metrics against other articles/reviews that were also published in the same calendar year. Selecting the 3-year option compares the metrics against other articles/reviews that were also published in the same calendar year plus the two years prior.
Example: if you select the 1-year option for an article published in 2019 and a metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019. If you select the 3-year option for the same article published in 2019 and the metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019, 2018 and 2017.
Citation Benchmarking is provided by Scopus and SciVal and is different from the metrics context provided by PlumX Metrics.
Example: if you select the 1-year option for an article published in 2019 and a metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019. If you select the 3-year option for the same article published in 2019 and the metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019, 2018 and 2017.
Citation Benchmarking is provided by Scopus and SciVal and is different from the metrics context provided by PlumX Metrics.
Article Description
Since the Great Financial Crisis (GFC), the decline in the estimated natural rate of interest (r*) has outpaced the fall in expected potential output growth, leaving most of the decline unexplained. A growing literature highlights the importance of the premium commanded by liquid assets--often referred to as convenience yield--for the determination of the natural rate of interest and the transmission of monetary policy. This paper estimates r* using a stylized New-Keynesian model that explicitly accounts for the convenience yield on US Treasury securities. We present evidence that two slow-moving variables, the permanent component of potential output growth and the permanent component of the convenience yield on US Treasuries, almost fully account for the level of r*. We show that a rise in the convenience yield has contributed to the decline in r* since the GFC, and that accounting for the dynamics of the convenience yield increases the precision of the r* estimates.
Bibliographic Details
Provide Feedback
Have ideas for a new metric? Would you like to see something else here?Let us know