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Money market rates and implied CCAPM rates: some international evidence

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  • Ahmad, Yamin

Abstract

New Neoclassical Synthesis models equate the instrument of monetary policy to the implied CCAPM rate arising from an Euler equation. This paper identifies monetary policy shocks within six of the G7 countries and examines the movement of money market and implied CCAPM rates. The key result is that an increase in the nominal interest rate leads to a fall in the implied CCAPM rate. Incorporating habit still yields the same result. The findings suggest that the movement of these two rates implied by the transmission mechanism of monetary policy in NNS models cannot be reconciled through the consumption Euler equation.

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Bibliographic Info

Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 45 (2005)
Issue (Month): 4-5 (September)
Pages: 699-729

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Handle: RePEc:eee:quaeco:v:45:y:2005:i:4-5:p:699-729

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Web page: http://www.elsevier.com/locate/inca/620167

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Citations

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Cited by:
  1. Gareis, Johannes & Mayer, Eric, 2012. "Euler equations and money market interest rates: The role of monetary and risk premium shocks," W.E.P. - Würzburg Economic Papers 89, University of Würzburg, Chair for Monetary Policy and International Economics.
  2. Giovanni Di Bartolomeo & Lorenza Rossi & Massimiliano Tancioni, 2009. "Monetary Policy, Rule-of-Thumb Consumers and External Habits: A G7 Comparison," Quaderni di Dipartimento 101, University of Pavia, Department of Economics and Quantitative Methods.
  3. Yamin Ahmad, 2005. "Reconciling The Effects of Monetary Policy Actions on Consumption Within A Heterogeneous Agent Framework," Computing in Economics and Finance 2005 121, Society for Computational Economics.
  4. Yamin Ahmad, 2004. "International Observations of Monetary Policy Periods," Working Papers 05-01, UW-Whitewater, Department of Economics, revised Jul 2007.
  5. Di Bartolomeo, Giovanni & Manzo, Marco, 2007. "Do tax distortions lead to more indeterminacy? A New Keynesian perspective," MPRA Paper 3549, University Library of Munich, Germany.
  6. Giovanni Di Bartolomeo & Lorenzo Rossi & Massimiliano Tancioni, 2006. "Monetary Policy under Rule-of-Thumb Consumers and External Habits: An International Empirical Comparison," Working Papers 97, University of Rome La Sapienza, Department of Public Economics.
  7. Camelia Ioana Ucenic & Laura Bacali, 2008. "The Impact Of It Advance Of Smes� For The Romanian Economy," Working Papers 0804, University of Crete, Department of Economics.
  8. Giovanni Di Bartolomeo & Lorenza Rossi, 2005. "Efficacy of Monetary Policy and Limited Asset Market Participation," Macroeconomics 0508027, EconWPA.
  9. Giovanni Di Bartolomeo & Lorenza Rossi, 2005. "Heterogeneous Consumers, Demand Regimes, Monetary Policy Efficacy and Determinacy," Macroeconomics 0508028, EconWPA.

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