Unlike the observed short-term interest rate, the shadow rate—first introduced by Fischer Black (1995)—is not bounded below by 0 percent. Whenever the Wu-Xia shadow rate is above 1/4 percent, it is exactly equal to the model implied one-month interest rate by construction.
The input data for the Cynthia Wu and Fan Dora Xia model are one-month forward rates beginning n years hence. Wu and Xia use forward rates corresponding to n = 1/4, 1/2, 1, 2, 5, 7, and 10 years. These forward rates are constructed with end-of-month Nelson-Siegel-Svensson yield curve parameters from the Gurkaynak, Sack, and Wright (2006) dataset. The full details of the Wu and Xia model are described in their accompanying paper. In short, the shadow rate is assumed to be a linear function of three latent variables called factors, which follow a VAR(1) process. The latent factors and the shadow rate are estimated with the extended Kalman filter.