Unveiling the natural yield curve: estimation and policy implications from the case of Korea

초록

We estimate the natural yield curve in Korea and analyse its implications for monetary policy to determine whether the effects of monetary policy are being effectively transmitted to market rates across various maturities. To achieve this, we extend the concept of the natural rate of interest to encompass the entire yield curve. To robustly estimate the natural yield curve, we utilize various models and specifications, such as the semi-structural model, the Time-Varying Parameter Vector Autoregressive model, and the linear state-space model. Our findings indicate declining trends in natural rates across all maturities in Korea, with fluctuations observed over different time periods. The analysis also sheds light on the financial conditions that prevailed during the 2021-23 tightening cycle.

키워드