Monetary Policy, Forward Rates and Long Rates: Does Germany Differ from the United States?
AbstractIn this paper we analyse the impact of monetary policy shocks on the term structure of interest rates in US and Germany. We estimate the term structure of spot rates and of the instantaneous forward rate following the methodology proposed by Svensson(1994). We interpret the instantaneous forward rate as the expectations for the overnight rate prevailing at each point in the future. Exploiting the fact that intervention on policy rates take place in occasion of regular meetings of the FOMC in the US and of the Bundesbank Council in Germany, we estimate the term structure of spot rates and of instantaneous forward rates the day before and the day after regular meetings. From the estimation of the term structures before meetings we derive a measure of expectations for Central Banks interventions. On this basis we can assess the predictability of monetary policy under the null of the validity of the pure expectational model. We perform this exercise both by regression analysis and by the implementation of a non-parametric test proposed by Pesaran and Timmermann(1990). We then proceed to derive a measure of policy shocks by using information on the effective intervention. Such measure of policy shocks is available both for dates in which some intervention was effectively implemented by Central Banks and for dates in which a policy of no intervention was decided. Finally, we evaluate the impact of monetary policy on the term structure of interest rates by regressing the change in the yield curve between the day before and the day after meetings on expected and unexpected modification in policy rates. We conduct such exercise for the US and Germany over the period 1991-1995 to evaluate the sign and the magnitude of the response of the term structures in the two countries to expected and unexpected modifications in monetary policy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1456.
Date of creation: Sep 1996
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Papadamou, Stephanos, 2013. "Market anticipation of monetary policy actions and interest rate transmission to US Treasury market rates," Economic Modelling, Elsevier, vol. 33(C), pages 545-551.
- Andersson, Malin & DillÃ©n, Hans & Sellin, Peter, 2001. "Monetary Policy Signaling and Movements in the Swedish Term Structure of Interest Rates," Working Paper Series 132, Sveriges Riksbank (Central Bank of Sweden), revised 01 Jan 2004.
- Gabriel PÃ©rez QuirÃ³s & Jorge Sicilia, 2002.
"Is the European Central Bank (and the United States Federal Reserve) predictable?,"
Banco de Espaï¿½a Working Papers
0229, Banco de Espaï¿½a.
- PÃ©rez QuirÃ³s, Gabriel & Sicilia, Jorge, 2002. "Is the European Central Bank (and the United States Federal Reserve) predictable?," Working Paper Series, European Central Bank 0192, European Central Bank.
- Bagliano, Fabio C. & Favero, Carlo A., 1998.
"Measuring monetary policy with VAR models: An evaluation,"
European Economic Review,
Elsevier, vol. 42(6), pages 1069-1112, June.
- Bagliano, Fabio-Cesare & Favero, Carlo A, 1997. "Measuring Monetary Policy with VAR Models: An Evaluation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1743, C.E.P.R. Discussion Papers.
- Fabio C. Bagliano & Carlo A. Favero, . "Measuring Monetary Policy with VAR Models: an Evaluation," Working Papers 132, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Andrew G Haldane & Vicky Read, 2000. "Monetary policy surprises and the yield curve," Bank of England working papers 106, Bank of England.
- Malin Andersson & Hans DillÃ©n & Peter Sellin, 2002. "Monetary policy signalling and movements in the Swedish term structure of interest rates," BIS Papers chapters, in: Bank for International Settlements (ed.), Market functioning and central bank policy, volume 12, pages 268-297 Bank for International Settlements.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.