Short-term and long-term interest rates in a monetary model of a small open economy
AbstractThis paper analyzes the effects of both anticipated and unanticipated monetary and fiscal disturbances, on the dynamic behavior of a monetary model of a small open economy. It focuses on the adjustment of the short-term and long-term interest rates and the divergence of their transitional paths, particularly in anticipation of these disturbances. The analysis demonstrates how anticipation of a future policy change can generate perverse short-run behavior. The essential reason for the divergence between the short and long rates is that the latter is dominated by long-term expectations, while the former is primarily determined by current influences.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Economics.
Volume (Year): 20 (1986)
Issue (Month): 3-4 (May)
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Web page: http://www.elsevier.com/locate/inca/505552
Other versions of this item:
- Stephen J. Turnovsky, 1987. "Short-Term and Long-Term Interest Rates in a Monetary Model of a Small Open Economy," NBER Working Papers 1716, National Bureau of Economic Research, Inc.
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