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2 edition of Monetary policy and the term structure of interest rates found in the catalog.

Monetary policy and the term structure of interest rates

Bennett T. McCallum

Monetary policy and the term structure of interest rates

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  • 2 Currently reading

Published by National Bureau of Economic Research in Cambridge, MA .
Written in English

    Subjects:
  • Monetary policy -- Mathematical models.,
  • Interest rates -- Mathematical models.

  • Edition Notes

    StatementBennett T. McCallum.
    SeriesNBER working paper series -- working paper no. 4938, Working paper series (National Bureau of Economic Research) -- working paper no. 4938.
    ContributionsNational Bureau of Economic Research.
    The Physical Object
    Pagination26 p. ;
    Number of Pages26
    ID Numbers
    Open LibraryOL22420654M


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Monetary policy and the term structure of interest rates by Bennett T. McCallum Download PDF EPUB FB2

This book, entitled Interest Rates: Term Structure Models, Monetary Policy and Prediction sheds light on selected aspects of this multifaceted role of interest rates. Topics discussed include term structure models; policy interest rates and the usefulness of interest rates Author: Yasuo Nishiyama.

Interest rate rules play an important role in the empirical analysis of monetary policy as well as in modern monetary theory. Besides giving a comprehensive insight into this line of research the study incorporates the term structure of interest rates into interest rate rules.

This is performed analytically as well as : Ralf Fendel. Monetary Policy, Interest Rate Rules, and the Term Structure of Interest Rates: Theoretical Considerations and Empirical Implications (Studien Zu Internationalen Wirtschaftsbeziehungen) [Ralf Fendel] on *FREE* shipping on qualifying offers.

Monetary Policy and the Term Structure of Interest Rates Bennett T. McCallum. NBER Working Paper No. Issued in November NBER Program(s):Monetary Economics, Economic Fluctuations and Growth This paper addresses a prominent empirical failure of the expectations theory of the term structure of interest rates under the assumption of rational Cited by: interest parity in foreign exchange, which can be rationalized—it is argued by McCallum ()—as a consequence of monetary policy behavior that is ignored in the usual regression tests.

In the present article it is shown that a similar result is applicable to the term-structure puzzle. In particular, the. Keywords: Term Structure of Interest Rates, Monetary Policy, Sticky Prices, Habit For-mation, Expectations Hypothesis. JEL classification: E43, E44, E5, Monetary policy and the term structure of interest rates book ∗We would like to thank Robert Kollman for sharing his code and notes, Ondra Kamenik for help with Dynare++.

US monetary policy is investigated using a regime-switching no-arbitrage term structure model that relies on inflation, output, and the short interest rate as factors. The model is complemented with a set of assumptions that allow the dynamics of the private sector to be separated from monetary by: 1.

The role of the term structure of interest rates in the monetary policy transmission mechanism In this section, we review the various hypotheses proposed in the literature to explain the correlation observed between the yield curve spread (for short, the yield spread) and economic activity.

"Monetary policy and the term structure of interest rates," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 91(Fall), pages References listed on IDEAS as. Monetary policy directly affects short-term interest rates; it indirectly affects longer-term interest rates, currency exchange rates, and prices of equities and other assets and thus wealth.

Through these channels, monetary policy influences household spending, business investment, production, employment, and inflation in the United States. show that the conduct of monetary policy is a key factor behind these results.

1See, e.g., Fama (, ) and Mishkin (, a, ) for studies on inflation expectations and the term structure of interest rates using U.S. data. Mishkin () and Jorion and Mishkin () use international data. List of Contributors Introduction Monetary Policy and Interest Rates; ni and i Exchange Rate Regimes and the Expectation Hypothesis of the Term Structure; h and Decomposing the Term Structure Into Risk Premia and Expectations: Evidence for the Eurolira Rates; and Long Term Bond Yields, Monetary Policy and the Expectation Hypothesis of the Term.

When graphed, the term structure of interest rates is known as a yield curve, and it plays a central role in an economy.

The term structure reflects expectations of market participants about future. NBER Working Paper No. (Also Reprint No. r) Issued in September NBER Program(s):Monetary Economics.

This paper examines the relationship of the term structure of interest rates to monetary policy instruments and to subsequent real activity and inflation in both Europe and the United by: "Monetary policy regimes and the term structure of interest rates," Journal of Econometrics, Elsevier, vol.

(1), pages Bikbov, Ruslan & Chernov, Mikhail, " Monetary Policy Regimes and the Term Structure of Interest Rates," CEPR Discussion PapersC.E.P.R.

Discussion Papers. This paper analyzes whether the Fed had the ability through its conventional monetary policy to affect key economic and financial variables, and, in particular, the term structure of interest rates, during the recent financial crisis.

Affecting the term structure. Besides interpreting the term structure of interest rates, central banks also may be interested in altering it through shifts in monetary policy.

In the common textbook description of the transmission of monetary policy, as encapsulated for example in the so-called IS-LM model, the supply of money plays an.

Term structure of interest rates and monetary policy. [Jing Cynthia Wu] -- My dissertation solves various difficulties of Affine-Term-Structure Models (ATSM) known or unknown in the literature, by providing an explicit mapping between the reduced-form and ATSM parameters.

The interest rate is the chief target of monetary policy, and central banks have the ability to control short-term interest rates to the extent of almost %. Longer-term interest rates are anchored in short-term rates. The principal interest rate targeted is the banks’ prime lending rate (PR) (which is a benchmark rate, ie all bank lending.

"A Macro-Finance Model of the Term Structure, Monetary Policy and the Economy," Economic Journal, Royal Economic Society, vol. (), pagesJuly. Glenn D. Rudebusch & Tao Wu, "A macro-finance model of the term structure, monetary policy, and the economy," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.

Downloadable. We study how well a New Keynesian business cycle model can explain the observed behavior of nominal interest rates. We focus on two puzzles raised in previous literature.

First, Donaldson, Johnsen, and Mehra () show that while in the U.S. nominal term structure the interest rates are pro-cyclical and term spreads counter-cyclical the stochastic. NBER Program(s):Asset Pricing, Monetary Economics. We estimate the effect of shifts in monetary policy using the term structure of interest rates.

In our no-arbitrage model, the short rate follows a version of the Taylor () rule where the coefficients on the output gap and inflation vary over by: of Interest Rates for Monetary Policy Marvin Goodfriend The term structure of interest rates, i.e., the yield curve, has long been of interest to monetary policymakers and their advisers.

The transmission of monetary policy is conventionally viewed as running from short-term interest rates managed by central banks to longer-term rates that.

This paper studies the equilibrium term structure of nominal and real interest rates and the time-varying bond risk premia implied by a stochastic endogenous growth model with imperfect price adjustment and monetary policy by: Get this from a library. Monetary policy and the term structure of interest rates.

[Bennett T McCallum; National Bureau of Economic Research.]. However, such quarterly monetary policy inertia would imply a large amount of forecastable variation in interest rates at horizons of more than 3 months, which is contradicted by evidence from the term structure of interest rates.

The illusion of monetary policy inertia evident in the estimated policy rules likely reflects the persistent shocks Cited by: Monetary policy surprises and interest rates: These responses are generally consistent with the expectations hypothesis of the term structure.

Surprise target rate changes have little effect on expectations of future actions, however, which helps to explain the lack of empirical support for the expectations hypothesis at the short end of Cited by: Taylor Rules, McCallum Rules and the Term Structure of Interest Rates Michael Gallmeyer, Burton Hollifield, Stanley E.

Zin. NBER Working Paper No. Issued in April NBER Program(s):Asset Pricing, Monetary Economics Recent empirical research shows that a reasonable characterization of federal-funds-rate targeting behavior is that the change in the target rate Cited by: Monetary Policy Shifts and the Term Structure.

Andrew Ang (), Jean Boivin (), Sen Dong and Rudy Loo-Kung. NoNBER Working Papers from National Bureau of Economic Research, Inc Abstract: We estimate the effect of shifts in monetary policy using the term structure of interest rates.

In our no-arbitrage model, the short rate follows a version of the Taylor () Cited by: Stabilizing an unstable economy: Fiscal and monetary policy, stocks, and the term structure of interest rates bank has full control over the short-term rate of interest we assume in the following either an interest rate peg or an interest rate policy rule as the monetary policy of the central bank.

Note that the central bank can set the Cited by:   Macroeconomics and the Term Structure by Refet S. Gürkaynak and Jonathan H. Wright. Published in vol issue 2, pages of Journal of Economic Literature, JuneAbstract: This paper provides an overview of the analysis of the term structure of interest rates with a special emphasis o.

by most term structure analyses, the preponderance of empirical evidence suggests that the rela-tionships between interest rates and macroeconomic variables changed during the past 40 years, as the reaction function setting monetary policy. Reuben A. Kessel, "The Cyclical Behavior of the Term Structure of Interest Rates," NBER Books, National Bureau of Economic Research, Inc, number kess Marvin Goodfriend, "Monetary policy comes of age: a 20th century odyssey," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages Money, Interest Rates, and Monetary Policy.

What is the statement on longer-run goals and monetary policy strategy and why does the Federal Open Market Committee put it out. What is the basic legal framework that determines the conduct of monetary policy.

What is the difference between monetary policy and fiscal policy, and how are they related.and i Is the Term Structure of Interest Rates a Useful Indicator for Spanish Monetary Policy?; and Monetary Policy and the Term Structure of Interest Rates: An Overview of Some Recent Research; sch Using the Term Structure of Interest Rates for Monetary Policy; iend Index: Responsibility.

Expectations of Inflation, the Term Structure of Interest Rates and Monetary Policy Michael MAGILL Department of Economics University of Southern California Los Angeles, CA [email protected] Martine QUINZII Department of Economics University of California Davis, CA [email protected] Abstract.

April Uncertainty shocks, monetary policy and long-term interest rates. Gianni Amisano and Oreste Tristani. Abstract: We study the relationship between monetary policy and long-term rates in a structural, general equilibrium model estimated Cited by: 1.

The liquidity, effect hypothesis maintains that a surprise tightening in monetary policy increases short-term nominal interest rates, and lowers output, prices, and monetary aggregates. This hypothesis reflects the consensus view about how monetary policy affects the U.S.

economy [see e.g. the recent survey article by Christiano, Eichenbaum Cited by: Monetary Policy and the Term Structure of Interest Rates of an autoregressive term premium plus the assumption that monetary policy involves smoothing of an interest rate instrument—the short rate—together with policy responses to the prevailing level of the spread.

Subscribe to Economic Quarterly. Receive an email notification when. Monetary policy is the policy adopted by the monetary authority of a country that controls either the interest rate payable on very short-term borrowing or the money supply, often targeting inflation or the interest rate to ensure price stability and general trust in the currency.

Unlike fiscal policy, which relies on taxation, government spending, and government borrowing, as. uctuations of the slope of the term structure of interest rates. We nd that one sin- The slope of the term structure { commonly de ned as the spread between the yield on a long- the slope of the term structure plays a central role for the transmission of monetary policy (e.g.

Clarida, Gali and Gertler ). A number of recent studies File Size: KB.Get this from a library! Monetary policy, interest rate rules, and the term structure of interest rates: theoretical considerations and empirical implications. [Ralf Fendel].Keywords: monetary policy rules, uncertainty shocks, term structure of interest rates, regime switches, Bayesian estimation.

1 Introduction Following Smets and Wouters (), estimated general equilibrium models with sticky prices have become popular tools for monetary policy analysis in central by: 1.