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A note on the effect of expected changes in monetary policy on long-term interest rates

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Author Info
Hany S. Guirguis () (Manhattan College)
Christos I. Giannikos (Columbia University and City University of New York)

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Abstract

The ability of monetary policy to affect long-term interest rates is of central importance for economics and finance. Several recent studies have shown that long-term interest rates are virtually unaffected by monetary policy. This paper develops a statistical methodology to identify the expected and unexpected changes in monetary policy as measured by the federal funds rate. The empirical evidence shows that expected changes in the funds rate cause stronger and more significant movements in the long-term rates. Further, ignoring such asymmetry can erroneously generate the insignificant responses of long-term interest rates to the changes in the monetary policy.

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File URL: http://www4.cema.edu.ar/pjae/m/146GuirgGiann200705
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Publisher Info
Article provided by Universidad del CEMA in its journal Journal of Applied Economics.

Volume (Year): X (2007)
Issue (Month): (May)
Pages: 99-114
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Handle: RePEc:cem:jaecon:v:10:y:2007:n:1:p:99-114

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Related research
Keywords: Long-term interest rate; monetary policy; asymmetry;

Find related papers by JEL classification:
E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
C5 - Mathematical and Quantitative Methods - - Econometric Modeling

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Das, Rituparna Das, 2009. "Indian G-Sec Market: How the Term Structure Reacts to Monetary Policy," MPRA Paper 16436, University Library of Munich, Germany. [Downloadable!]
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This page was last updated on 2009-11-30.

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