Author: Refet S. GurkaynakPublisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 62
Book Description
The Excess Sensitivity of Long-run Term Interest Rates
Author: Refet S. GurkaynakPublisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 62
Book Description
The Excess Sensitivity of Long-term Interest Rates
Author: Refet S. GürkaynakThe sensitivity of long-term interest rates to economic news
Author: Michelle L. BarnesChanges in the Relationship Between the Long-Term Interest Rate and its Determinants
Author: Mr.William LeePublisher: International Monetary Fund
ISBN: 145185465X
Category : Business & Economics
Languages : en
Pages : 30
Book Description
This paper assesses the relative importance of alternative explanations for the rise in long-term interest rates in the United States from October 1993 to April 1994. Standard econometric models of the term structure are shown to have a structural break in the early 1980s. An important reason for this change in the traditional term structure relationship appears to be an increase in the responsiveness of long-term rates to changes in the stance of monetary policy. Augmented term structure models that explicitly incorporate the role of monetary policy in determining the level of long-term rates are then constructed. These models track variations in the long-term rate better than traditional term structure models, but still leave a significant fraction of the recent increase in long-term rates unexplained.
A Simple Account of the Behavior of Long-term Interest Rates
Author: John Y. CampbellPublisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 58
Book Description
Recent empirical research on the term structure of interest rates has shown that the long-term interest rate is well described by adistributed lag on short-term interest rates, but does not conform to the expectations theory of the term structure. It has been suggested that the long rate "overreacts" to the short rate. This paper presents aunified taxonomy of risk premia, or deviations from the expectations theory. This enables the hypothesis of overreaction to be formally stated. It is shown that, if anything, the long rate has underreacted to the short rate. However, the independent movement of the long rate is primarily responsible for the failure of the expectations theory.
Excess Volatility and the Smoothing of Interest Rates
Author: Steven StronginPublisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 34
Book Description
Excess Sensitivity and Volatility of Long Interest Rates
Author: Meredith J. BeecheyPublisher:
ISBN:
Category :
Languages : en
Pages : 53
Book Description
Asymmetric information between the central bank and bond markets creates an inference problem that affects the behaviour of long interest rates. This paper employs a simple macroeconomic model with a time-varying inflation target to illustrate the implications of asymmetry for the sensitivity of long rates and volatility of bond returns. When the central bank's inflation target is not communicated and macroeconomic shocks are imperfectly observed, bond markets infer the value of the target from noisy signals. This heightens the sensitivity of long-run inflation expectations to transitory shocks, thereby raising the measured reaction of long rates to monetary policy and to inflation surprises. Calibrated coeffcients from such regressions are more than twice as large when bondmarkets lack knowledge of the target compared with a full information scenario. Time variation in the inflation target is the main source of volatility, but learning adds to the ability of the model to explain the observed volatility of returns along the yield curve.
Do Long-term Interest Rates Overreact to Short-term Interest Rates?
Author: N. Gregory MankiwPublisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 44
Book Description
This paper examines the hypothesis that financial markets are myopic by studying the term structure of interest rates. White rejecting decisively the traditional expectations hypothesis regarding the term structure, our statistical results also lead us to conclude that long term interest rates do not overreact to either the level or the change in short termrates. This finding suggests that participants in bond markets are not myopic or overly sensitive to recent events. Our statistical results also suggest that most variations in the yield curve reflect changes in liquidity premia rather than expected changes in interest rates.
Long-run Causality, with an Application to International Links Between Long-term Interest Rates
Author: Catherine BruneauPublisher:
ISBN:
Category : Banks and banking
Languages : en
Pages : 19
Book Description
Negative Interest Rate Policy (NIRP)
Author: Andreas JobstPublisher: International Monetary Fund
ISBN: 1475524471
Category : Business & Economics
Languages : en
Pages : 48
Book Description
More than two years ago the European Central Bank (ECB) adopted a negative interest rate policy (NIRP) to achieve its price stability objective. Negative interest rates have so far supported easier financial conditions and contributed to a modest expansion in credit, demonstrating that the zero lower bound is less binding than previously thought. However, interest rate cuts also weigh on bank profitability. Substantial rate cuts may at some point outweigh the benefits from higher asset values and stronger aggregate demand. Further monetary accommodation may need to rely more on credit easing and an expansion of the ECB’s balance sheet rather than substantial additional reductions in the policy rate.