Download This PaperWhy are Long Rates Sensitive to Monetary Policy?
IGIER Working Paper No. 256
45 Pages Posted: 14 Mar 2004
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Why are Long Rates Sensitive to Monetary Policy?
Why are Long Rates Sensitive to Monetary Policy?
Date Written: March 2004
Abstract
We use a quantitative model of the U.S. economy to analyze the response of long-term interest rates to monetary policy, and compare the model results with empirical evidence. We find that the strong and time-varying yield curve response to monetary policy innovations found in the data can be explained by the model. A key ingredient in explaining the yield curve response is central bank private information about the state of the economy or about its own target for inflation.
Keywords: Term structure of interest rates, yield curve, central bank private
JEL Classification: E43, E52
Suggested Citation: Suggested Citation
Norwegian School of Economics (NHH) - Department of Economics
Helleveien 30
N-5035 Bergen
Norway
Ulf Söderström (Contact Author)
Central Bank of Sweden - Research Department ( email )
Stockholm, 103 37
Sweden
+46 8 787 0829 (Phone)
+46 8 21 05 31 (Fax)
HOME PAGE: http://www.riksbank.se/research/soderstrom
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