Author: Publisher:
ISBN:
Category :
Languages : en
Pages : 16
Book Description
Uncertainty on Monetary Policy and the Expectational Model of the Term Structure of Interest Rates
Author: Uncertainty on Monetary Policy and the Expectations Model of the Term Structure of Interest Rates
Author: Carlo A. FaveroPublisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 28
Book Description
Uncertainty on Monetary Policy and the Xpectations Model of the Term Structure of Interest Rates
Author: Carlo A. FaveroThe Role of Monetary Policy Uncertainty in the Term Structure of Interest Rates
Author: Junko KoedaPublisher:
ISBN:
Category : GARCH model
Languages : en
Pages : 35
Book Description
"We examine the effect of uncertainty arising from policy-shock volatility on yield-curve dynamics. In contrast to the assumption of many macro-finance models, policy-shock processes appear to be time varying and persistent. We allow for this heteroskedasticity by constructing a no-arbitrage GARCH affine term structure model, in which policy-shock volatility is defined as the conditional volatility of the error term in a Taylor rule. We find that an increase in monetary policy uncertainty raises the medium- and longer-term spreads in a model that incorporates macroeconomic dynamics."--Authors' abstract.
Term Structure of Inflation Expectations and Real Interest Rates
Author: S. Boragan AruobaPublisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 52
Book Description
"Inflation expectations have recently received increased interest because of the uncertainty created by the Federal Reserve's unprecedented reaction to the Great Recession. The effect of this reaction on the real economy is also an important topic. In this paper the author uses various surveys to produce a term structure of inflation expectations - inflation expectations at any horizon from 3 to 120 months - and an associated term structure of real interest rates. Inflation expectations extracted from this model track actual (ex-post) realizations of inflation quite well, and in terms of forecast accuracy they are at par with or superior to some popular alternatives obtained from financial variables. Looking at the period 2008-2013, the author concludes that the unconventional policies of the Federal Reserve kept long-run inflation expectations anchored and provided a large level of monetary stimulus to the economy."--Abstract.
Monetary Policy Rules and the Term Structure of Interest Rates
Author: Shu WuLong-Memory Inflation Uncertainty
Author: David K. BackusPublisher:
ISBN:
Category :
Languages : en
Pages : 33
Book Description
We use a fractional difference model to reconcile two features of yields on US government bonds with modem asset pricing theory: the persistence of the short rate and variability of the long end of the yield curve. We suggest that this process might arise from the response of the heterogeneous agents to the changes in monetary policy.
Economic Policy Uncertainty and the Yield Curve
Author: Markus LeippoldPublisher:
ISBN:
Category :
Languages : en
Pages : 66
Book Description
This paper analyzes the impact of economic policy uncertainty on the term structure of real and nominal interest rates. We derive a general equilibrium model where the real side of the economy is driven by government policy uncertainty and the central bank sets money supply endogenously following a Taylor rule. We analyze the impact of government and monetary policy uncertainty on nominal yields, short rates, bond risk premia and the term structure of bond yield volatility. Furthermore, we show that our standard affine yield curve model is able to capture both, the shape of the term structure of interest rates as well as the hump-shaped bond yield volatility curve. Finally, the empirical analysis shows that, whereas higher government policy uncertainty leads to a decline in yields, and an increase in bond yield volatility, monetary policy uncertainty does not have a significant contemporaneous effect on movements in the yield or volatility but is however an important predictor for bond risk premia.
Anticipated Monetary Policy and the Dynamic Behaviour of the Term Structure of Interest Rates
Author: Jarkko P. JääskeläPublisher:
ISBN:
Category :
Languages : en
Pages : 39
Book Description
This paper investigates the measurement of anticipated interest rate policy and the effects of these expectations on the term structure of nominal interest rates. It is shown that, under the expectations hypothesis, the level of long-term interest rates depends on three factors: the level of the monetary policy interest rate, ie the steering rate; the spread between the market interest rate and the steering rate; and market expectations of the next steering rate change. The theoretical model builds on the assumption that market participants have only imperfect knowledge of the mechanism whereby changes in the steering rate are determined. As a consequence, expectations formation, although realistic, need not be entirely rational. Steering rate changes take the form of discrete jumps and occur infrequently on a daily scale. Given these assumptions, discussion of the determination of the term structure is related to the literature on uncertainty about monetary policy regimes and small samples, ie peso problems. Empirical analysis based on Nelson-Siegel estimates of the daily yield curves in Finland in the period 1 January 1993 to 31 October 1997 complements the theoretical discussion. The observed differences between estimated market expectations and actual tender rate changes are quite large in the sample, particularly for the longer maturities. The approach applied in this study is promising, not only in the sense of potentially providing estimates of market expectations concerning future discrete changes in monetary policy interest rates but also in the sense of its apparent potential in accounting for the often reported poor empirical performance of the expectations hypothesis.
Expectations, Uncertainty, and the Term Structure of Interest Rates
Author: J. C. DoddsPublisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 336
Book Description