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The influence of fiscal and monetary policies on the shape of the yield curve

Author

Listed:
  • Chang, Yoosoon
  • Gómez-Rodríguez, Fabio
  • Matthes, Christian

Abstract

We study how fiscal and monetary policy shape the nominal yield curve and associated term premia. Government spending affects the long end of the curve, while tax changes and monetary policy influence the short end at impact. Within spending categories, only government consumption shifts the short end, but these effects dissipate within a year. While monetary policy and government consumption operate primarily through expected short rates, other fiscal interventions affect yields mainly by altering term premia.

Suggested Citation

  • Chang, Yoosoon & Gómez-Rodríguez, Fabio & Matthes, Christian, 2026. "The influence of fiscal and monetary policies on the shape of the yield curve," Journal of Economic Dynamics and Control, Elsevier, vol. 184(C).
    • Handle: RePEc:eee:dyncon:v:184:y:2026:i:c:s0165188926000229
    DOI: 10.1016/j.jedc.2026.105276
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    Keywords

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    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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