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Monetary policy and the Fisher effect

  • Soderlind, Paul

Historical estimates of the Fisher effect and the informational content in the yield curve may not be relevant after a change in monetary policy. This paper uses a small dynamic rational expectations model with staggered price setting to study how central bank preferences (and thereby monetary policy) affect the relation between nominal interest rates, inflation expectations, and real interest rates. The benchmark parameters, including the Federal Reserve Bank’s loss function parameters, are estimated by maximum likelihood on quarterly US data. The policy experiments include stronger inflation targeting, more active monetary policy, and a change in commitment technology.

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File URL: http://www.sciencedirect.com/science/article/B6V82-447N1VN-2/2/24c60c31c27839928925b87d814defd6
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Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 23 (2001)
Issue (Month): 5 (July)
Pages: 491-495

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Handle: RePEc:eee:jpolmo:v:23:y:2001:i:5:p:491-495
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505735

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  1. Söderlind, Paul, 1998. "Solution and Estimation of RE Macromodels with Optimal Policy," SSE/EFI Working Paper Series in Economics and Finance 256, Stockholm School of Economics.
  2. Soderlind, Paul, 1998. " Nominal Interest Rates as Indicators of Inflation Expectations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(2), pages 457-72, June.
  3. Mishkin, Frederic S., 1992. "Is the Fisher effect for real? : A reexamination of the relationship between inflation and interest rates," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 195-215, November.
  4. Fuhrer, Jeffrey C & Moore, George R, 1995. "Monetary Policy Trade-offs and the Correlation between Nominal Interest Rates and Real Output," American Economic Review, American Economic Association, vol. 85(1), pages 219-39, March.
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