Modelling Target Areas for Short-Term Interest Rates
Cuadernos de Economía, Vol. 25, No. 45, 2006
32 Pages Posted: 13 Jul 2007
This article presents a short-term interest rate monetary model; it generalises Junca and Rodríguez's interest rate formation model and captures the exogenous and endogenous factors determining monetary supply and short-term interest rate behaviour. Short-term interest rate rises with increased expectations of future inflation, external interest rate and future short-term interest-rate expectations. The model shows that a policy for controlling the amount of money could stabilise the short-term rate, as well as other interest rates.
Note: The downloadable document is in Spanish.
Keywords: interest rate, monetary policy, target area model
JEL Classification: E43, E50
Suggested Citation: Suggested Citation