The Term Structure with Semi-credible Targeting
AbstractThe Federal Reserve sets targets for interest rates which it enforces through direct market intervention. These targets are changed periodically. In this paper, we develop a term structure model in which the short rate is subject to a control which keeps it close to a target which changes from time to time. The probability of target changes is not constant in the model, but changes as a function of observables. The model performs well at explaining the shifts in the yield curve that accompany target changes. Copyright (c) 2003 by the American Finance Association.
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Bibliographic InfoArticle provided by American Finance Association in its journal The Journal of Finance.
Volume (Year): 58 (2003)
Issue (Month): 2 (04)
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- Fan, Longzhen & Johansson, Anders C., 2009. "What Moves Bond Yields In China?," Working Paper Series 2009-9, China Economic Research Center, Stockholm School of Economics.
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2009-3, China Economic Research Center, Stockholm School of Economics.
- Fan, Longzhen & Tian, Shu & Zhang, Chu, 2012. "Why are excess returns on China’s Treasury bonds so predictable? The role of the monetary system," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 239-248.
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