The Long and the Short End of the Term Structure of Policy Rules
The Long and the Short End of the Term Structure of Policy Rules

Author: Josephine M. Smith

Publisher:

Published: 2007

Total Pages: 56

ISBN-13:

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We first document a large secular shift in the estimated response of the entire term structure of interest rates to inflation and output in the United States. The shift occurred in the early 1980s. We then derive an equation that links these responses to the coefficients of the central bank's monetary policy rule for the short-term interest rate. The equation reveals two countervailing forces that help explain and understand the nature of the link and how its sign is determined. Using this equation, we show that a shift in the policy rule in the early 1980s provides an explanation for the observed shift in the term structure. We also explore a shift in the policy rule in the 2002-2005 period and its possible effect on long-term rates.

The Term Structure of Interest Rates and Monetary Policy During a Zero-Interest-Rate Period
The Term Structure of Interest Rates and Monetary Policy During a Zero-Interest-Rate Period

Author: Mr. Jun Nagayasu

Publisher: International Monetary Fund

Published: 2003-10-01

Total Pages: 32

ISBN-13: 1451919301

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This paper empirically evaluates the validity of the term structure of interest rates in a low-interest-rate environment. Applying a time-series method to high-frequency Japanese data, the term-structure model is found to be useful for economic analysis only when interest rates are high. When interest rates are low, the usefulness of the model declines, since the interest spread contains little information that can be used for predicting future economic activity. The term-structure relationship is also weakened by the Bank of Japan''s use of interest rate smoothing.

Using the Term Structure of Interest Rates for Monetary Policy
Using the Term Structure of Interest Rates for Monetary Policy

Author:

Publisher:

Published:

Total Pages:

ISBN-13:

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The Federal Reserve Bank of Richmond presents the full text of an article entitled "Using the Term Structure of Interest Rates for Monetary Policy," by Marvin Goodfriend. The article was published in the Summer 1998 issue of "Economic Quarterly." Goodfriend discusses how the term structure of interest rates serves as a link in the transmission of monetary policy and as an indicator of inflation expectations.

The Term Structure of Interest Rates and Unconventional Federal Reserve Monetary Policy
The Term Structure of Interest Rates and Unconventional Federal Reserve Monetary Policy

Author: John Gonzales

Publisher:

Published: 2013

Total Pages:

ISBN-13:

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The term structure of interest rates argues that a fundamental determinant of the Treasury yield curve is expected future short-term interest rates. In early 2013 it is possible to construct a predicted yield curve based on future expectations, and compare it to the actual yield curve. Due to the unconventional Federal Reserve policies that began in 2008, the actual yield curve lies well below that predicted by the term structure theory. Our research indicates that the cumulative impact as of January 2013 of the unconventional Fed monetary policies is to decrease the 10-year Treasury yield by about 80 basis points.