New policy rate offers better gauge of U.S. monetary policy impact.
The article introduces a new way to measure U.S. monetary policy when interest rates are stuck at zero. By creating a "shadow rate" based on Federal Reserve actions, researchers can better understand how effective monetary policy is during economic crises. This shadow rate closely mirrors the actual interest rate before the crisis and helps compare policy decisions to standard benchmarks. Additionally, it helps identify the impact of unconventional policy measures on the economy.