Why Are Long Rates Sensitive to Monetary Policy?
AbstractWe use a quantitative model of the U.S. economy to analyze the response of long-term interest rates to monetary policy, and compare the model results with empirical evidence. We find that the strong and time-varying yield curve response to monetary policy innovations found in the data can be explained by the model. A key ingredient in explaining the yield curve response is central bank private information about the state of the economy or about its own target for inflation.
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.
Bibliographic InfoPaper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 160.
Length: 38 pages
Date of creation: 01 Apr 2004
Date of revision:
Term structure of interest rates; Yield curve; Central bank private information; Excess sensitivity;
Other versions of this item:
- Ellingsen, Tore & Söderström, Ulf, 2004. "Why are Long Rates Sensitive to Monetary Policy?," CEPR Discussion Papers 4360, C.E.P.R. Discussion Papers.
- Ulf Soderstrom & Tore Ellingsen, 2004. "Why are long rates sensitive to monetary policy?," Computing in Economics and Finance 2004 31, Society for Computational Economics.
- Tore Ellingsen & Ulf Soderstrom, 2004. "Why are Long Rates Sensitive to Monetary Policy," Working Papers 256, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- 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
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joe Peek & Eric S. Rosengren & Geoffrey M. B. Tootell, 1999.
"Is bank supervision central to central banking?,"
99-7, Federal Reserve Bank of Boston.
- David H. Romer & Christina D. Romer, 2000. "Federal Reserve Information and the Behavior of Interest Rates," American Economic Review, American Economic Association, vol. 90(3), pages 429-457, June.
- Ric Battellino & John Broadbent & Philip Lowe, 1997. "The Implementation of Monetary Policy in Australia," RBA Research Discussion Papers rdp9703, Reserve Bank of Australia.
- Rudebusch, Glenn D., 2000.
"Assessing nominal income rules for monetary policy with model and data uncertainty,"
Working Paper Series
0014, European Central Bank.
- Glenn D. Rudebusch, 2002. "Assessing Nominal Income Rules for Monetary Policy with Model and Data Uncertainty," Economic Journal, Royal Economic Society, vol. 112(479), pages 402-432, April.
- Glenn D. Rudebusch, 2000. "Assessing nominal income rules for monetary policy with model and data uncertainty," Working Paper Series 2000-03, Federal Reserve Bank of San Francisco.
- Glenn Rudebusch, 2000. "Assessing Nominal Income Rules for Monetary Policy with Model and Data Uncertainty," Econometric Society World Congress 2000 Contributed Papers 0065, Econometric Society.
- Roberto Rigobon & Brian Sack, 2002.
"The impact of monetary policy on asset prices,"
Finance and Economics Discussion Series
2002-4, Board of Governors of the Federal Reserve System (U.S.).
- Ellingsen, Tore & Söderström, Ulf, 1998.
"Monetary Policy and Market Interest Rates,"
Working Paper Series in Economics and Finance
242, Stockholm School of Economics, revised 08 Mar 1999.
- Charles L. Evans & David A. Marshall, 1997.
"Monetary policy and the term structure of nominal interest rates: evidence and theory,"
Working Paper Series, Macroeconomic Issues
WP-97-10, Federal Reserve Bank of Chicago.
- Evans, Charles L. & Marshall, David A., 1998. "Monetary policy and the term structure of nominal interest rates: Evidence and theory," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 49(1), pages 53-111, December.
- Söderlind, Paul, 1998.
"Solution and Estimation of RE Macromodels with Optimal Policy,"
Working Paper Series in Economics and Finance
256, Stockholm School of Economics.
- Soderlind, Paul, 1999. "Solution and estimation of RE macromodels with optimal policy," European Economic Review, Elsevier, vol. 43(4-6), pages 813-823, April.
- Peersman, Gert, 2002. "Monetary policy and long term interest rates in Germany," Economics Letters, Elsevier, vol. 77(2), pages 271-277, October.
- Kuttner, Kenneth N., 2001.
"Monetary policy surprises and interest rates: Evidence from the Fed funds futures market,"
Journal of Monetary Economics,
Elsevier, vol. 47(3), pages 523-544, June.
- Kenneth N. Kuttner, 2000. "Monetary policy surprises and interest rates: evidence from the Fed funds futures markets," Staff Reports 99, Federal Reserve Bank of New York.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lena Löfgren).
If references are entirely missing, you can add them using this form.