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The Term Structure of Interest Rates and the Effects of Macroeconomic Policy

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  • Turnovsky, Stephen J

Abstract

This paper analyzes the effects of monetary and fiscal policy shocks on the term structure of interest rates. Temporary versus permanent, unanticipated versus anticipated policy disturbances and the responses of long versus short, and real versus nominal rates are contrasted. The main results are summarized in a series of propositions. Among them, the finding that an unanticipated permanent fiscal expansion impacts more on long-term rates may help explain their observed excessive volatility. The effects of structural changes on the relative variances are also discussed, with the effect that operates through the impact on private speculative behavior being emphasized. Copyright 1989 by Ohio State University Press.

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Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 21 (1989)
Issue (Month): 3 (August)
Pages: 321-47

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Handle: RePEc:mcb:jmoncb:v:21:y:1989:i:3:p:321-47

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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Cited by:
  1. Jagjit Chadha & Sean Holly, 2006. "Macroeconomic Models and the Yield Curve," Computing in Economics and Finance 2006 105, Society for Computational Economics.
  2. Arman Mansoorian & Mohammed Mohsin, 2002. "Monetary Policy in a Cash-in-Advance Economy Employment, Capital Accumulation and the Term Structure of Interest Rates," Working Papers 2002_02, York University, Department of Economics.
  3. Cebula, Richard, 1990. "A Note on Federal Budget Deficits and the Term Structure of Real Interest Rates in the United States," MPRA Paper 50238, University Library of Munich, Germany.
  4. Stephen K. McNees & Geoffrey M. B. Tootell, 1991. ""Whither New England"?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 11-26.
  5. Helen Popper, 1995. "Term premia comovement in German, Japanese, and U.S. domestic markets," Open Economies Review, Springer, vol. 6(1), pages 49-62, January.
  6. Walter Fisher, 2000. "The Term Structure of Interest Rates in a Small Open Economy: A Stochastic Analysis," Open Economies Review, Springer, vol. 11(3), pages 261-278, July.
  7. Bruno Ducoudré, 2005. "Fiscal policy and interest rates," Documents de Travail de l'OFCE 2005-08, Observatoire Francais des Conjonctures Economiques (OFCE).
  8. Chadha, J.S. & Holly, S., 2006. "Macroeconomic Models and the Yield Curve: An assessment of the Fit," Cambridge Working Papers in Economics 0640, Faculty of Economics, University of Cambridge.
  9. Duarte, Agustin & Venetis, Ioannis A. & Paya, Ivan, 2005. "Predicting real growth and the probability of recession in the Euro area using the yield spread," International Journal of Forecasting, Elsevier, vol. 21(2), pages 261-277.
  10. Viktor Kotlán, 2001. "Monetary policy and the term structure of interest rates in a small open economy - a model framework approach," Macroeconomics 0110003, EconWPA.
  11. Jesper Lindé, 2001. "Fiscal policy and interest rates in a small open economy," Finnish Economic Papers, Finnish Economic Association, vol. 14(2), pages 65-83, Autumn.
  12. van Bergeijk, Peter A. G. & Berk, Jan Marc, 2000. "Is the yield curve a useful Information variable for the Eurosystem?," Working Paper Series 0011, European Central Bank.
  13. Duarte, A. & Venetis, I. & Payá, I., 2004. "Curva de rendimientos y crecimiento de la producción real en la UEM: eficiencia y estabilidad predictiva./Yield Curve and Real Output Growth in the EMU: Efficiency and Predictive Stability," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 22, pages 21, Abril.
  14. Maria Carme Riera i Prunera, 2003. "Deficit, human capital and economic growth dynamics," Working Papers in Economics 102, Universitat de Barcelona. Espai de Recerca en Economia.

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