Arbeitspapier
Euler equations and money market interest rates: The role of monetary and risk premium shocks
This paper challenges the view that the observed negative correlation between the Federal Funds rate and the interest rate implied by consumption Euler equations is systematically linked to monetary policy. By using a Monte Carlo experiment, we show that stochastic risk premium disturbances have the capability to drive a wedge between the interest rate targeted by the central bank and the implied Euler equation interest rate such that the correlation between actual and implied rates is negative.
- Language
-
Englisch
- Bibliographic citation
-
Series: W.E.P. - Würzburg Economic Papers ; No. 89
- Classification
-
Wirtschaft
General Aggregative Models: General
Interest Rates: Determination, Term Structure, and Effects
Financial Markets and the Macroeconomy
Monetary Policy
- Subject
-
Euler Interest Rate
Monetary Policy
Risk Premium Shocks
- Event
-
Geistige Schöpfung
- (who)
-
Gareis, Johannes
Mayer, Eric
- Event
-
Veröffentlichung
- (who)
-
University of Würzburg, Department of Economics
- (where)
-
Würzburg
- (when)
-
2012
- Handle
- Last update
-
10.03.2025, 11:41 AM CET
Data provider
This object is provided by:
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Gareis, Johannes
- Mayer, Eric
- University of Würzburg, Department of Economics
Time of origin
- 2012
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