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The fed and the term structure: Addressing simultaneity within a structural VAR model

Listed author(s):
  • Farka, Mira
  • DaSilva, Amadeu

This paper applies a new identification approach to estimate the contemporaneous relation between the term structure and monetary policy within a VAR framework. To achieve identification, we combine high-frequency Treasury futures and fed funds futures data with the VAR methodology. Results indicate that policy actions have a slope effect in the yield curve. We also find that the Fed responds to Treasury yields and that this response is stronger for the short and intermediate rates and less aggressive for long-yields. All estimated parameters are significant and robust to various model specifications.

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File URL: http://www.sciencedirect.com/science/article/pii/S0927539811000636
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Article provided by Elsevier in its journal Journal of Empirical Finance.

Volume (Year): 18 (2011)
Issue (Month): 5 ()
Pages: 935-952

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Handle: RePEc:eee:empfin:v:18:y:2011:i:5:p:935-952
DOI: 10.1016/j.jempfin.2011.08.004
Contact details of provider: Web page: http://www.elsevier.com/locate/jempfin

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