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Monetary Policy and Bond Option Pricing in an Analytical RBC Model

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  • Söderlind, Paul

    ()
    (Dept. of Finance, Stockholm School of Economics)

Abstract

This paper analyzes how bond option prices are affected by different types of monetary policy. Analytical results from a general equilibrium model with sticky wages show that employment or output targeting typically give lower bond option prices than inflation targeting.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 0447.

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Length: 12 pages
Date of creation: 17 May 2001
Date of revision: 24 Aug 2001
Publication status: Published in Journal of Economics and Business, 2003, pages 321-330.
Handle: RePEc:hhs:hastef:0447

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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
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Web page: http://www.hhs.se/
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Related research

Keywords: inflation targeting; output targeting; interest rates;

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References

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  1. Steven P. Cassou & Kevin J. Lansing, 1995. "Optimal fiscal policy, public capital, and the productivity slowdown," Working Paper 9509, Federal Reserve Bank of Cleveland.
  2. Bénassy, Jean-Pascal, 1993. "Money and wage contracts in an optimizing model of the business cycle," CEPREMAP Working Papers (Couverture Orange) 9325, CEPREMAP.
  3. Hercovitz, Z. & Sampson, M., 1989. "Output Growth, The Real Wage, And Employment Fluctuations," RCER Working Papers 179, University of Rochester - Center for Economic Research (RCER).
  4. Frederic S. Mishkin, 1988. "What Does the Term Structure Tell Us About Future Inflation?," NBER Working Papers 2626, National Bureau of Economic Research, Inc.
  5. Soderlind, Paul, 1998. " Nominal Interest Rates as Indicators of Inflation Expectations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(2), pages 457-72, June.
  6. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
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Cited by:
  1. Vähämaa, Sami, 2004. "Option-implied asymmetries in bond market expectations around monetary policy actions of the ECB," Working Paper Series 0315, European Central Bank.

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