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    Term structure transmission of monetary policy

    Kozicki, S. and Tinsley, P.A. (2008) Term structure transmission of monetary policy. The North American Journal of Economics and Finance 19 (1), pp. 71-92. ISSN 1062-9408.

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    Abstract

    Under bond rate transmission of monetary policy, standard restrictions on policy responses to obtain determinate inflation need not apply. In periods of passive policy, bond rates may exhibit stable responses to inflation if future policy is anticipated to be active, or if time-varying term premiums incorporate inflation-dependent risk pricing. We derive a generalized Taylor Principle that requires a lower bound to the average anticipated path of forward rate responses to inflation. We also present a no-arbitrage term structure model with horizon-dependent policy and time-varying term premiums to explain mechanics and provide empirical results supporting these channels.

    Metadata

    Item Type: Article
    Keyword(s) / Subject(s): asymmetric information, no-arbitrage term structure, the great inflation, the Taylor Principle, determinacy of inflation, horizon-dependent expectations
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 18 Nov 2010 14:50
    Last Modified: 17 Apr 2013 12:33
    URI: http://eprints.bbk.ac.uk/id/eprint/1994

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