Conundrum or complication : a study of yield curve dynamics under unusual economic conditions and monetary policies

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Title: Conundrum or complication : a study of yield curve dynamics under unusual economic conditions and monetary policies
Authors: Cripwell, Peter
Edelman, David
Permanent link: http://hdl.handle.net/10197/1176
Date: 4-Mar-2008
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
Copyright (published version): 2008, Centre for Financial Markets
Keywords: Federal ReserveTerm structure of interest ratesInflation
Subject LCSH: Interest rates
Monetary policy
Federal Reserve banks
Other versions: http://www.ucd.ie/bankingfinance/docs/wp/WP-08-02.pdf
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Centre for Financial Markets Working Papers

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