IDEAS home Printed from https://ideas.repec.org/a/kap/openec/v11y2000i3p261-278.html
   My bibliography  Save this article

The Term Structure of Interest Rates in a Small Open Economy: A Stochastic Analysis

Author

Listed:
  • Walter Fisher

Abstract

This article employs a rational expectations IS-LM model with price adjustment to study the effect of domestic monetary and fiscal policy and world interest rate disturbances on the real and nominal small open economy term structure of interest rates. The impact of both temporary and permanent shocks are investigated. Notable results include the fact that monetary expansions lead to positive yield curves, while the implications of fiscal expansions and increases in the world interest rate depend crucially on the duration of the shock. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • Walter Fisher, 2000. "The Term Structure of Interest Rates in a Small Open Economy: A Stochastic Analysis," Open Economies Review, Springer, vol. 11(3), pages 261-278, July.
    • Handle: RePEc:kap:openec:v:11:y:2000:i:3:p:261-278
    DOI: 10.1023/A:1008326924208
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1023/A:1008326924208
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1023/A:1008326924208?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. McCafferty, Stephen, 1986. "Aggregate Demand and Interest Rates: A Macroeconomic Approach to the Term Structure," Economic Inquiry, Western Economic Association International, vol. 24(4), pages 521-533, October.
    2. Turnovsky, Stephen J, 1989. "The Term Structure of Interest Rates and the Effects of Macroeconomic Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(3), pages 321-347, August.
    3. Turnovsky, Stephen J, 1981. "Monetary Policy and Foreign Price Disturbances under Flexible Exchange Rates: A Stochastic Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(2), pages 156-176, May.
    4. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-1176, December.
    5. Turnovsky, Stephen J., 1986. "Short-term and long-term interest rates in a monetary model of a small open economy," Journal of International Economics, Elsevier, vol. 20(3-4), pages 291-311, May.
    6. Turnovsky, Stephen J & Miller, Marcus H, 1984. "The Effects of Government Expenditure on the Term Structure of Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(1), pages 16-33, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dennis Nsafoah & Apostolos Serletis, 2020. "Monetary Policy and Interest Rate Spreads," Open Economies Review, Springer, vol. 31(3), pages 707-727, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arman Mansoorian & Mohammed Mohsin, 2004. "Monetary policy in a cash-in-advance economy: employment, capital accumulation, and the term structure of interest rates," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 336-352, May.
    2. Arman Mansoorian & Mohammed Mohsin, 2004. "Monetary policy in a cash‐in‐advance economy: employment, capital accumulation, and the term structure of interest rates," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 37(2), pages 336-352, May.
    3. repec:hal:spmain:info:hdl:2441/5221 is not listed on IDEAS
    4. Bruno Ducoudre, 2008. "Structure par terme des taux d’intérêt et anticipations de la politique économique," Sciences Po publications info:hdl:2441/5221, Sciences Po.
    5. Drobyshevsky Sergey & Lugovoy Oleg & Astafieva Ekaterina & Burkova N. Yu., 2009. "Modeling the term structure of interest rates on Russian government bonds in 2000 – 2008," Research Paper Series, Gaidar Institute for Economic Policy, issue 130P.
    6. Turnovsky, Stephen J, 1989. "The Term Structure of Interest Rates and the Effects of Macroeconomic Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(3), pages 321-347, August.
    7. O'Mara, L. Paul & Wallace, N.A. & Meshios, Helen, 1987. "The Current Account, Monetary Policy, Market Sentiment And The Real Exchange Rate: Some Implications For The Farm Sector," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 31(3), pages 1-23, December.
    8. Bruno Ducoudré, 2005. "Fiscal policy and interest rates," Documents de Travail de l'OFCE 2005-08, Observatoire Francais des Conjonctures Economiques (OFCE).
    9. Fisher, Walter H., 1995. "An optimizing analysis of the effects of world interest disturbances on the open economy term structure of interest rates," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 105-126, February.
    10. Marinho, Emerson & Benegas, Mauricio, 2020. "Constant real expenditure policy: the macroeconomic impacts of budget composition and a primary surplus," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    11. Steve Ambler, 1988. "Fiscal and monetary policy in an open economy with staggered wages," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 124(1), pages 58-73, March.
    12. Cushman, David O. & Zha, Tao, 1997. "Identifying monetary policy in a small open economy under flexible exchange rates," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 433-448, August.
    13. Offick Sven & Wohltmann Hans-Werner, 2016. "Partially Anticipated Monetary Policy Shocks – Are They Stabilizing or Destabilizing?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(1), pages 95-127, February.
    14. Jesper Lindé, 2001. "Fiscal policy and interest rates in a small open economy," Finnish Economic Papers, Finnish Economic Association, vol. 14(2), pages 65-83, Autumn.
    15. 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.
    16. Arman Mansoorian & Mohammed Mohsin, 2002. "The Employment, Investment and Current Account Effects of Exchange Rate Policies in a Cash-in-Advance Economy," Working Papers 2002_04, York University, Department of Economics.
    17. Narayan, Seema & Narayan, Paresh Kumar & Tobing, Lutzardo, 2021. "Has tourism influenced Indonesia’s current account?," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 225-237.
    18. Hwang, Chiun-Lin, 1989. "Optimal monetary policy in an open macroeconomic model with rational expectation," ISU General Staff Papers 1989010108000010197, Iowa State University, Department of Economics.
    19. Cho, Guedae & Kim, MinKyoung & Koo, Won W., 2003. "Relative Agricultural Price Changes In Different Time Horizons," 2003 Annual meeting, July 27-30, Montreal, Canada 22249, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    20. Mohammed Umar & Jauhari Dahalan, 2016. "An Application of Asymmetric Toda Yamamoto Causality on Exchange Rate-inflation Differentials in Emerging Economies," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 420-426.
    21. Miller, M. & Weller, P., 1988. "Solving Stochastic Saddlepoint Systems: A Qualitative Treatment With Economic Applications," The Warwick Economics Research Paper Series (TWERPS) 309, University of Warwick, Department of Economics.

    More about this item

    Keywords

    open economy; term structure;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:openec:v:11:y:2000:i:3:p:261-278. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.