We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Monetary Policy Shifts and the Term Structure.
- Authors
Ang, Andrew; Boivin, Jean; Dong, Sen; Loo-Kung, Rudy
- Abstract
We estimate the effect of shifts in monetary policy using the term structure of interest rates. In our no-arbitrage model, the short rate follows a version of the Taylor's (1993, “Discretion Versus Policy Rules in Practice”, Carnegie-Rochester Conference Series on Public Policy, 39, 195–214) rule where the coefficients on the output gap and inflation vary over time. The monetary policy loading on the output gap has averaged around 0·4 and has not changed very much over time. The overall response of the yield curve to output gap components is relatively small. In contrast, the inflation loading has changed substantially over the last 50 years and ranges from close to zero in 2003 to a high of 2·4 in 1983. Long-term bonds are sensitive to inflation policy shifts with increases in inflation loadings leading to higher short rates and widening yield spreads.
- Subjects
MONETARY policy; YIELD curve (Finance); PRICE inflation; EFFECT of monetary policy on unemployment; NATURAL rate of unemployment; MACROECONOMICS
- Publication
Review of Economic Studies, 2011, Vol 78, Issue 2, p429
- ISSN
0034-6527
- Publication type
Article
- DOI
10.1093/restud/rdq006