Time-Varying Yield Curve Dynamics and Monetary Policy

Arbeitspapier

The dynamics of the US economy are modelled using a time-varying structural vector autoregression that incorporates information from the yield curve. We find important changes in the dynamics of macroeconomic variables such as inflation and the federal funds rate. In addition our results suggest a change in the relationship between the yield curve and macroeconomic variables. The monetary policy shocks of the early 1980s explain a large portion of the persistence of inflation and the level of the yield curve. Shocks to the level of the yield curve account for the persistence of the federal funds rate. We use our time-varying model provides to revisit the evidence on the expectations hypothesis.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: External MPC Unit Discussion Paper ; No. 23

Classification and Topics

• Classification: Wirtschaft ; Statistical Simulation Methods: General ; Financial Markets and the Macroeconomy ; Monetary Policy
• Subject: Nelson-Siegel ; time variation ; inflation expectations ; credibility building ; evidence on expectations hypothesis ; Zinsstruktur ; Inflationserwartung ; Geldpolitik ; Neue klassische Makroökonomik ; VAR-Modell ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mumtaz, Haroon ; Surico, Paolo
• Event: Veröffentlichung
• (who): Bank of England, External Monetary Policy Committee Unit
• (where): London
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/84697
• Last update: 10.03.2025, 11:41 AM CET