Money Growth and Interest Rates

59 Pages Posted: 2 Mar 2005 Last revised: 3 Nov 2021

See all articles by Seok-Kyun Hur

Seok-Kyun Hur

Korea Development Institute (KDI)

Date Written: February 2005

Abstract

Our paper explores a transmission mechanism of monetary policy through bond market. Based on the assumption of delayed responses of economic agents to monetary shocks, we derive a system of equations relating the term structure of interest rates with the past history of money growth rates and test the equations with the US data. Our results confirm that the higher ordered moments of money growth rate(converted from the past history of money growth rates) influence the yields of bonds with various maturities in different timing as well as in different magnitudes and monetary policy targeting a certain shape of the term structure of interest rates could be implemented with certain time lags due to path-dependency of interest rates.

Suggested Citation

Hur, Seok-Kyun, Money Growth and Interest Rates (February 2005). NBER Working Paper No. w11102, Available at SSRN: https://ssrn.com/abstract=661781

Seok-Kyun Hur (Contact Author)

Korea Development Institute (KDI) ( email )

263 Namsejong-ro
Sejong-si 30149
Korea, Republic of (South Korea)

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