Abstract

http://ssrn.com/abstract=124569
 


 



Information Content in the Term Structure of Money Market Interest Rates on Future Inflation: The Case of Finland


Juha-Pekka Junttila


Jyväskylä University School of Business and Economics; University of Oulu - Department of Economics

May 1998


Abstract:     
Using a Markov-switching regime change model applied to Finnish money market interest spreads we find that unobserved changes from tightening to loosening monetary policy are important when examining the explanatory power of interest rates on future inflation changes. The unobserved regime changes are revealed ex ante (3 - 4 months ahead) with respect to observed changes in a recently introduced measure for the stance of monetary policy, i.e. the Monetary Conditions Index (MCI). Implementing the derived monetary policy regime changes to the analysis does not increase the forecasting power of interest rate spreads on future inflation changes, but the monetary policy regime itself explains changes in the future inflation rates strongly.

JEL Classification: C22, E31, E42, E43

working papers series


Not Available For Download

Date posted: September 17, 1998  

Suggested Citation

Junttila, Juha-Pekka, Information Content in the Term Structure of Money Market Interest Rates on Future Inflation: The Case of Finland (May 1998). Available at SSRN: http://ssrn.com/abstract=124569

Contact Information

Juha-Pekka Junttila (Contact Author)
Jyväskylä University School of Business and Economics ( email )
Ohjelmakaari 10
PO Box 35 FIN-40014 University of Jyväskylä
Jyväskylä, FIN-40014
Finland
University of Oulu - Department of Economics ( email )
PO Box 4600
FIN-90014 University of Oulu
Finland
+358-8-553 2916 (Phone)
+358-8-553 2906 (Fax)
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