Pimco's Fels Explains the Concept of Shadow Rates

The video tutorial discusses the concept of shadow rates, which represent hypothetical negative levels of the Fed funds rate needed to achieve the same impact as quantitative easing (QE) and forward guidance. It explains how the Fed's policy has been tightening since 2014, despite the actual rate being above zero. The tutorial also compares the shadow rates of the ECB and BOJ, highlighting their use of QE and negative rates. It addresses the challenges central banks face in pushing rates aggressively negative and the implications for economic policy. Finally, it examines the ECB's balance sheet and potential future actions, including the purchase of infrastructure bonds.

What is the concept of shadow rates as discussed in the text?

How does the actual target rate compare to the shadow rate mentioned?

What are the limitations of central banks in pushing rates aggressively negative?

What alternative tools do central banks use instead of negative rates?

What impact did the Fed's tightening policy have on the economy according to the text?

How does the ECB's balance sheet compare to that of the Fed and BOJ?

What suggestions are made for the ECB to improve its monetary policy?