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Book The Role of Monetary Policy Uncertainty in the Term Structure of Interest Rates

Download or read book The Role of Monetary Policy Uncertainty in the Term Structure of Interest Rates written by Junko Koeda and published by . This book was released on 2010 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: "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.

Book Economic Policy Uncertainty and the Yield Curve

Download or read book Economic Policy Uncertainty and the Yield Curve written by Markus Leippold and published by . This book was released on 2015 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Book Estimating and Interpreting Forward Interest Rates

Download or read book Estimating and Interpreting Forward Interest Rates written by Mr.Lars E. O. Svensson and published by International Monetary Fund. This book was released on 1994-09-01 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: The use of forward interest rates as a monetary policy indicator is demonstrated, using Sweden 1992-1994 as an example. The forward rates are interpreted as indicating market expectations of the time-path of future interest rates, future inflation rates, and future currency depreciation rates. They separate market expectations for the short-, medium-, and long-term more easily than the standard yield curve. Forward rates are estimated with an extended and more flexible version of Nelson and Siegel’s functional form.

Book The Term Structure of Monetary Policy Uncertainty

Download or read book The Term Structure of Monetary Policy Uncertainty written by Brent Bundick and published by . This book was released on 2022 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Monetary Policy Rules and the Term Structure of Interest Rates

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:

Book Expectations Uncertainty and the Term Structure of Interest Rates

Download or read book Expectations Uncertainty and the Term Structure of Interest Rates written by J. Colin Dodds and published by . This book was released on 1992 with total page 314 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Short Rate Expectations Term Premiums and Central Bank Use of Derivatives to Reduce Policy Uncertainty

Download or read book Short Rate Expectations Term Premiums and Central Bank Use of Derivatives to Reduce Policy Uncertainty written by Peter A. Tinsley and published by . This book was released on 1999 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The term structure of interest rates is the primary transmission channel of monetary policy. Under the expectations hypothesis, anticipated settings of the short-term interest rate controlled by the central bank are the main determinants of nominal bond rates. Historical experience suggests that bond rates may remain relatively high even if the short-term interest rate is reduced to zero, in part due to term premiums reflecting uncertainty about future policy. Term spreads due to policy uncertainty may be reduced by central bank trading desk options that provide insurance against future deviations from an announced interest rate policy.

Book Less Bang for the Buck Assessing the Role of Inflation Uncertainty for U S Monetary Policy Transmission in a Data Rich Environment

Download or read book Less Bang for the Buck Assessing the Role of Inflation Uncertainty for U S Monetary Policy Transmission in a Data Rich Environment written by Helmut Herwartz and published by . This book was released on 2018 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the relationship between inflation uncertainty and monetary policy transmission in the U.S. economy. Monetary policy shocks are identified within the framework of nonlinear structural factor-augmented VARs which allow us to analyze several complementary hypotheses connecting IU with reduced monetary policy effectiveness. We find that the real effects of monetary policy shocks are markedly dampened conditional on high IU. This can be traced back to, inter alia, real-option and precautionary savings effects which distort the traditional interest rate channel. Moreover, policy transmission through the external finance premium and the term structure of interest rates appears strongly dependent on inflation uncertainty and contributes to the reduced policy effectiveness.

Book Long memory Inflation Uncertainty

Download or read book Long memory Inflation Uncertainty written by David Backus and published by . This book was released on 1993 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Book Money Information and Uncertainty

Download or read book Money Information and Uncertainty written by Charles Albert Eric Goodhart and published by . This book was released on 1989 with total page 520 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a completely revised edition of the well-known monetary textbook. The book discusses the latest analytical developments in monetary economic theory in a comprehensible and practical policy- orientated form for graduates and undergraduates specialising in monetary economics. The book provides a comprehensive survey of monetary economics, with the first nine chapters primarily concerned with micro issues, such as the role of, and demand for, money, the role and functions of banks and of the Central Bank; and the final nine chapters covering macro-economic issues, such as the transmission mechanism of monetary policy and international monetary problems.

Book Anticipated Monetary Policy and the Dynamic Behaviour of the Term Structure of Interest Rates

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.

Book The Response of Term Rates to Monetary Policy Uncertainty

Download or read book The Response of Term Rates to Monetary Policy Uncertainty written by Oscar Jorda and published by . This book was released on 2001 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows that greater uncertainty about monetary policy can lead to a decline in nominal interest rates. In the context of a limited participation model, monetary policy uncertainty is modeled as a mean-preserving spread in the distribution for the money growth process. This increase in uncertainty lowers the yield on short-term maturity bonds because the household sector responds by increasing liquidity in the banking sector. Long-term maturity bonds also have lower yields but this decrease is a result of the effect that greater uncertainty has on the nominal intertemporal rate of substitution - which is a convex function of money growth. These predictions are broadly supported by the data: the conditional variance of monetary policy shocks identified from a conventional monetary VAR negatively affects the yields of federal funds, and the three and six-month treasury bills.