Download or read book Essays on the Dynamic Interaction of Expectations Monetary Policy and the Term Structure of Interest Rates written by Albert Lee Chun and published by . This book was released on 2007 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays on the Term Structure of Interest Rates written by Nisha Aroskar and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This dissertation contributes to the study of the term structure of interest rates by addressing some of the gaps in this literature. The term structure is an important channel of monetary transmission. It also contains information about the intertemporal choices made by economic agents. The expectations Hypothesis is the primary explanation in economics that links short term interest rates to long term interest rates. In the first essay I extend the literature by examining the expectations hypothesis in the newly developed financial markets. I find that the expectations theory is not rejected in these markets. This evidence is in sharp contrast to the evidence earlier presented for industrialized countries. Further, contrary to the simple expectations theory, the term premium has high persistence, which is reflected in significantly autoregressive error terms. The evidence also supports the longstanding suggestion that the term premium could be related to the liquidity in the economy. The next essay investigates the forecasting ability of the term spread for future output growth. There appears to be a sharp decline in the predictive power of the term spread in countries that have adopted monetary policy with a stronger response to inflation. To explore the underlying economic reasons for these findings, I explicitly model the information content of the term spread for future output growth based on a structural model. Model calibrations suggest that the forecasting ability of the term spread changes with a change in the persistence and the variance of the underlying economic shocks and in the monetary policy preferences. The last essay focuses on the term structure as a link between short term and long term interest rates in macroeconomic models. I integrate the New Keynesian model and the model of the term structure based on the Intertemporal Consumption Asset Pricing Model. This is a more plausible description of the economy compared to the earlier models. In this model, output responds to an interest rate that includes a time varying term premium which, in turn is associated with economic agents expectations about the future economic variables. Empirical results provide confidence for future research in this direction.
Download or read book Anticipated Monetary Policy and the Dynamic Behaviour of the Term Structure of Interest Rates written by Jarkko P. Jääskelä and published by . This book was released on 2013 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Monetary Policy Rules and the Term Structure of Interest Rates written by Shu Wu and published by . This book was released on 2000 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays on the Relationship Between Interest Rates and Inflationary Expectations written by Warren Bradford Cornell and published by . This book was released on 1975 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Expectations Theory of the Term Structure of Interest Rates and Monetary Policy written by María Isabel Martínez Serna and published by . This book was released on 2000 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: The disparate evidence obtained by the empirical literature of the expectations theory of the term structure of interest rates has been interpreted in different ways. One explanation stems from the findings of Mankiw and Miron (1986) who observed that the term spread in the U.S. had substantial predictive power in line with the expectations theory before the founding of the Federal Reserve in 1914. Afterwards, the Fed's commitment to stabilising interest rates caused changes in short rates to become unpredictable on the basis of the spread. Consequently, these authors argue that monetary policy regime, and the extent to which it involves smoothing interest rates, determines the performance of the expectations theory.The argument of Mankiw and Miron has been extended and formalised by McCallum (1994), who develops a model of the interaction between the expectations theory, a time-varying autoregressive term premium, and an interest rate smoothing monetary policy combined with the use of the spread as an indicator. Kugler (1994) and Boero and Torricelli (1998) derive an exact solution to the McCallum model. Nevertheless, both of them limit their theoretical contribution to the case of one-period short rate. These two articles, together with Hsu and Kugler (1997), constitute the empirical applications of the model. All three conclude that the model is able to explain the results from standard tests of the expectations theory. The present research is intended to complete the existing theoretical and empirical literature about the McCallum model. Thus, we derive a generalisation of the exact solution of the model for any pair of maturities and, on the basis of the derived solution, we test the McCallum model for a wider range of maturities (all the above cited studies only use 1-month and 3-month interest rates) and for the Spanish term structure, to which the model has not yet been applied.
Download or read book Three Essays on the Interaction of Monetary Policy and Long term Interest Rates written by Yuan Xiao and published by . This book was released on 2000 with total page 210 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Interaction Between Monetary Policy and the Expectation Hypothesis of the Term Structure of Interest Rates in a N period Rational Expectation Model written by Luisa Malaguti and published by . This book was released on 1997 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Uncertainty on Monetary Policy and the Expectations Model of the Term Structure of Interest Rates written by Carlo A. Favero and published by . This book was released on 2001 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Interaction Between Monetary Policy and the Expectation Hypothesis of the Term Structure of Interest Rates in a N period Rational Expectation written by Luisa Malaguti and published by . This book was released on 1997 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Using the Term Structure of Interest Rates for Monetary Policy written by and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The Federal Reserve Bank of Richmond presents the full text of an article entitled "Using the Term Structure of Interest Rates for Monetary Policy," by Marvin Goodfriend. The article was published in the Summer 1998 issue of "Economic Quarterly." Goodfriend discusses how the term structure of interest rates serves as a link in the transmission of monetary policy and as an indicator of inflation expectations.
Download or read book The Interaction Between Monetary Policy and the Expectation Hypotesis of the Term Structure of Interest Rates in a N period Rational Expectation Model written by Luisa Malaguti and published by . This book was released on 1997 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Evidence Uncovered written by Jennifer E. Roush and published by . This book was released on 2003 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: A large body of literature has failed to find conclusive evidence that the expectations theory of the term structure holds in U.S. data. This paper asks more narrowly whether the theory holds conditional on an exogenous change in monetary policy. We argue that previous work on the expectation theory has failed to sufficiently account for interactions between monetary policy and bond markets in the determination of long and short interest rates. Using methods that directly account for this interaction, we find strong evidence supporting a term structure channel for policy that is consistent with the expectations theory. We show that the marginal effect of our consideration for this source of simultaneity bias is significant in uncovering evidence for the theory. We also discuss previous claims that policy regime changes and short-term interest rate smoothing by the Fed accounts for the theory's unconditional failure in light of our findings.
Download or read book Monetary Policy and the Term Structure of Interest Rates written by Bennett T. McCallum and published by . This book was released on 1994 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper addresses a prominent empirical failure of the expectations theory of the term structure of interest rates under the assumption of rational expectations. This failure concerns the magnitude of slope coefficients in regressions of short rate (or long- rate) changes on long-short spreads. It is shown that the anomalous empirical findings can be rationalized with the expectations theory by recognition of an exogenous random (but possibly autoregressive) term premium plus the assumption that monetary policy involves smoothing of an interest rate instrument -- the short rate -- together with the responses to the prevailing level of the spread
Download or read book Monetary Policy and the Term Structure of Nominal Interest Rates written by Charles Evans and published by . This book was released on 1997 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays on Yield Curve Models with Markov Switching and Macroeconomic Fundamentals written by Jared Levant and published by . This book was released on 2014 with total page 139 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation explores the interaction of the term structure of interest rates and the macroeconomy for the United States and United Kingdom. In particular, using a dynamic factor yield curve model, the three essays of this dissertation investigate the macroeconomic sources of parameter instability in the US and UK term structure. First, this dissertation explores if parameter instability in the term structures is reflected in structural breaks in latent yield curve factors - level, slope, and curvature. I test for a single and for multiple structural breaks. The results indicate that parameter instability in the US term structure is adequately captured by the structural breaks in the level and slope factors. Similarly, there is evidence that structural breaks in the level and curvature factors characterize parameter instability in the UK term structure. Next, I assume the dynamics of the US term structure follow a two-state Markov process. This allows interest rate dynamics to switch between the two states as frequently as the data dictates. A switching model is proposed which gives macroeconomic insight into an asymmetric monetary policy effect during expansions and recessions. A second proposed switching model provides evidence of a great moderation in the US term structure where there is a dramatic decrease in the volatility of yields. Lastly, I investigate the interaction of the UK term structure and macroeconomy. In order to establish a definitive one-to-one correspondence between macroeconomic fundamentals and latent yield curve factors, I estimate a dynamic yield curve model augmented with macroeconomic variables. Through impulse response analysis, I find that during the inflation-targeting period for the UK, the curvature factor is directly related to real economic activity. I then use this established interaction between the term structure and macroeconomy to gain macroeconomic insight into regime changes in the UK term structure. Using Markov-switching dynamic yield curve models, I estimate the term structure and find that periods of low volatility correspond to regimes where real economic activity and monetary policy have a greater effect on the bond market. Periods of high volatility are driven by inflation expectations having a greater influence on bond pricing.
Download or read book Essays on Monetary Policy Institutional Demand and the Term Structure of Interest Rates and Credit written by Daniele Peter Bieber and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
