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

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  • Stephen J. Turnovsky

Abstract

This paper analyzes the effects of monetary and fiscal policy shocks on the term structure of interest rates. The effects of 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 which operates through the impact on private speculative behavior being emphasized.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2902.

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Date of creation: Mar 1989
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Publication status: published as Journal of Money, Credit, and Banking, Vol. 21, No. 3, pp. 321-347,(August 1989).
Handle: RePEc:nbr:nberwo:2902

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Cited by:
  1. 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, Elsevier, vol. 21(2), pages 261-277.
  2. 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.
  3. Jesper Lindé, 2001. "Fiscal policy and interest rates in a small open economy," Finnish Economic Papers, Finnish Economic Association, Finnish Economic Association, vol. 14(2), pages 65-83, Autumn.
  4. van Bergeijk, Peter A. G. & Berk, Jan Marc, 2000. "Is the yield curve a useful Information variable for the Eurosystem?," Working Paper Series, European Central Bank 0011, European Central Bank.
  5. 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.
  6. 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, York University, Department of Economics 2002_02, York University, Department of Economics.
  7. Walter Fisher, 2000. "The Term Structure of Interest Rates in a Small Open Economy: A Stochastic Analysis," Open Economies Review, Springer, Springer, vol. 11(3), pages 261-278, July.
  8. Jagjit Chadha & Sean Holly, 2006. "Macroeconomic Models and the Yield Curve," Computing in Economics and Finance 2006, Society for Computational Economics 105, Society for Computational Economics.
  9. Chadha, Jagjit S. & Holly, Sean, 2010. "Macroeconomic models and the yield curve: An assessment of the fit," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 34(8), pages 1343-1358, August.
  10. 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.
  11. Helen Popper, 1995. "Term premia comovement in German, Japanese, and U.S. domestic markets," Open Economies Review, Springer, Springer, vol. 6(1), pages 49-62, January.
  12. Bruno Ducoudré, 2005. "Fiscal policy and interest rates," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2005-08, Observatoire Francais des Conjonctures Economiques (OFCE).
  13. Stephen K. McNees & Geoffrey M. B. Tootell, 1991. ""Whither New England"?," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue Jul, pages 11-26.
  14. Viktor Kotlán, 2001. "Monetary policy and the term structure of interest rates in a small open economy - a model framework approach," Macroeconomics, EconWPA 0110003, EconWPA.

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