Monetary Policy and the Term Structure of Interest Rates

21 Pages Posted: 6 Dec 2012

See all articles by Bennett T. McCallum

Bennett T. McCallum

Carnegie Mellon University - David A. Tepper School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: 2005

Abstract

A prominent failure of the expectations theory of the term structure of interest rates concerns the magnitude of slope coefficients in regressions of short rate (or long rate) changes on long-short spreads. The anomalous empirical findings can be rationalized with the expectations theory by recognition of an autoregressive term premium plus the assumption that monetary policy involves smoothing of an interest rate instrument — the short rate — together with policy responses to the prevailing level of the spread.

Suggested Citation

McCallum, Bennett T., Monetary Policy and the Term Structure of Interest Rates (2005). FRB Richmond Economic Quarterly, vol. 91, no. 4, Fall 2005, pp. 1-21, Available at SSRN: https://ssrn.com/abstract=2185552

Bennett T. McCallum (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
412-268-2347 (Phone)
412-268-7357 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
27
Abstract Views
373
PlumX Metrics