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The Friedman Rule in a Two Sector Small Open Economy

Cunha, Alexandre - Econometric Society - 2004

This paper investigates the properties of optimal monetary and fiscal policy in a two sector small open economy. If the government can optimally select all possible distorting tax rates, then it can implement Pareto efficient outcomes and the Friedman Rule is found to be a necessary condition...

Persistent link: https://www.econbiz.de/10005342198

Heterogeneous Information about the Term Structure of Interest Rates, Least-Squares Learning and Optimal Interest Rate Rules for Inflation Forecast Targeting

Tesfaselassie, Mewael; Schaling, Eric; Eijffinger, Sylvester - Econometric Society - 2004

In this paper we incorporate the term structure of interest rates in a standard inflation forecast targeting framework. Learning about the transmission process of monetary policy is introduced by having heterogeneous agents - i.e. the central bank and private agents - who have different...

Persistent link: https://www.econbiz.de/10005342215

Why Can the Yield Curve Predict Output Growth, Inflation, and Interest Rates? An Analysis with Affine Term Structure Model

Ichiue, Hibiki - Econometric Society - 2004

The literature gives evidence that term spreads help predict output growth, inflation, and interest rates. This paper integrates and explains these predictability results by using an affine term structure model with observable macroeconomic factors. The results suggest that consumers are willing...

Persistent link: https://www.econbiz.de/10005130246

Cointegration and Regime-Switching Risk Premia in the US Term Structure of Interest Rates

Tillmann, Peter - Econometric Society - 2004

To date the cointegrating properties and the regime-switching behavior of the term structure are two separate strands of the literature. This paper integrates these lines of research and introduces regime shifts into a cointegrated VAR model. We argue that the short-run dynamics of the...

Persistent link: https://www.econbiz.de/10005063728

A General Equilibrium Model of the Term Structure of Interest Rates under Regime-switching Risk

Zeng, Yong; Wu, Shu - Econometric Society - 2004

This paper incorporates the systematic risk of regime shifts into a general equilibrium model of the term structure of interest rates. The model shows that there is a new source of time-variation in bond term premiums in the presence of regime shifts. This new component is a regime-switching...

Persistent link: https://www.econbiz.de/10005342209

Nonlinearity in the Term Structure

Kim, Dong Heon - Econometric Society - 2004

This paper uses the flexible approach of Hamilton (2001) to investigate the nature of nonlinearities in the term structure. The paper reports clear evidence of nonlinearity, in contrast to the affine term structure model and consistent with recent claims in the literature. We find that there is...

Persistent link: https://www.econbiz.de/10005342379

Intertemporal Consumption and Consumer Demand

McLaren, Keith R.; Kim, H. Youn; Cooper, Russel J. - Econometric Society - 2004

This paper integrates two strands of studies on consumer demand and consumption and provides a unified framework for … demand system and derive a general Euler equation by allowing for life-cycle behavior and precautionary saving. We also … investigate liquidity constraints and habit formation in consumption behavior. The demand system and the Euler equation constitute …

Persistent link: https://www.econbiz.de/10005702544

Asymmetric Information, Stock Returns and Monetary Policy: A Theoretical and Empirical Analysis

Tas, Bedri Kamil Onur - Econometric Society - 2004

It is known that stock returns are affected by monetary policy. This paper theoretically and empirically investigates whether asymmetric information between the Federal Reserve and the public causes the relation between stock returns and monetary policy actions. The paper concludes that...

Persistent link: https://www.econbiz.de/10005130171

The Yield Curve, Recession and the Credibility of the Monetary Regime: long run evidence 1875-1997

Bordo, Michael; Haubrich, Joseph - Econometric Society - 2004

Most work showing the yield curve predicts future economic growth relies on post WWII data. We demonstrate that the yield curve has predictive content for most of the post Civil War period. This predictive ability, however, is closely related to the credibility of the monetary regime in place,...

Persistent link: https://www.econbiz.de/10005063720

Cousin Risks: The Extent and the Causes of Positive Correlation between Country and Currency Risks

Garcia, Marcio; Lowenkron, Alexandre - Econometric Society - 2004

If country and currency risk premiums are positively correlated, a negative international liquidity shock harms twice the economy, thereby substantially increasing interest rates. This harmful positive correlation between country and currency risk premiums observed in some countries is called...

Persistent link: https://www.econbiz.de/10005328851

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