Tore Ellingsen () and Ulf Söderström ()
Additional contact information
Tore Ellingsen: Stockholm School of Economics, Postal: Department of Economics, Box 6501, SE-113 83 Stockholm, Sweden
Ulf Söderström: Universita Bocconi, Postal: Department of Economics and IGIER, Via Salasco 5, 20136 Milano, Italy
Abstract: We use a quantitative model of the U.S. economy to analyze the response of long-term interest rates to monetary policy, and compare the model results with empirical evidence. We find that the strong and time-varying yield curve response to monetary policy innovations found in the data can be explained by the model. A key ingredient in explaining the yield curve response is central bank private information about the state of the economy or about its own target for inflation.
Keywords: Term structure of interest rates; Yield curve; Central bank private information; Excess sensitivity
38 pages, April 1, 2004
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WP_160.pdf
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