Goldman Looks At Modification In Equilibrium Funds Rate

The best-known statistical framework for estimating the equilibrium funds rate is the Laubach-Williams model, a new research report from Goldman Sachs points out.  But that model has “limitations,” the report notes.

Goldman: Does the current Laubach-Williams model tell the whole story?

The estimated equilibrium funds rate in the Laubach-Williams model has been nearly zero in real terms for nearly five years “and shows no sign of normalization,” the report says.  To Goldman analysts Jan Hatzius, Alec Phillip, Jari Stehn, Kris Dawsey, David Mericle, Chris Mischaikow and Karen Reichgott, this could be distorting outcomes.  “This seems more consistent with secular stagnation than with temporary headwinds,” the write,...