Short and Long Interest Rate Targets
A target for the short-term nominal interest rate does not pin down realized inflation. Neither does it pin down the term premia. Short and long rates are threrefore independent monetary policy instruments. A target of the term structure is equivalent to a peg of the returns on state-contingent nominal assets. These are the rates that should be targeted in order to pin down realized inflation.
Year of publication: |
2012
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Authors: | Teles, Pedro ; Correia, Isabel ; Adao, Bernardino |
Institutions: | Society for Economic Dynamics - SED |
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