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Conundrum or complication : a study of yield curve dynamics under unusual economic conditions and monetary policies
Author(s)
Date Issued
2008-03-04
Date Available
2009-06-11T16:04:28Z
Abstract
The definition of the decline of long term yields in the light of increasing short term yields as a conundrum by Chairman Greenspan in February 2005 has generated a significant amount of research. This paper presents a study of yield curve dynamics over this period using economic surprise data as the diagnostic tool. Results are presented for both US and Japanese data which indicate a non-linear response of the yield curve to economic data and monetary policy over the period in question. Further, a limited model is presented that is consistent with the observations. This can lead to an explanation of the conundrum in terms of a non-linear yield response to expected long term inflation and a variable expected long term real rate.
Type of Material
Working Paper
Publisher
University College Dublin. School of Business. Centre for Financial Markets
Series
Centre for Financial Markets working paper series
WP-08-02
Copyright (Published Version)
2008, Centre for Financial Markets
Classification
E43
E44
E52
E58
Subject – LCSH
Interest rates
Monetary policy
Federal Reserve banks
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
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