We explore the effect of volatility in the federal funds market on the expectations hypothesis in money markets. We find that lower volatility in the bank funding markets market, all else equal, leads to a lower term premium and thus longer-term rates for a given setting of the overnight rate....

The subprime financial crisis has forced several North American and European central banks to take extraordinary measures and to modify some of their operational procedures. These changes have made even clearer the deficiencies and lack of realism in mainstream monetary theory, as can be found...

An approximate dynamic factor model can substantially improve the reliability of real time output gap estimates. The model extracts a common component from macroeconomic indicators, which reduces errors in the gap due to data revisions. The model's ability to handle the unbalanced arrival of...

This paper discusses the reasons for Brazil.s high policy real interest rates by considering two opposing views, the orthodox and heterodox approaches. While orthodox authors defend the position that bad domestic policies are the cause of the high interest rate, heterodox economists claim that...

This paper analyzes the determinants of the interest rate of short-term unsecured loan inter-bank market (call) in Argentina. The results show that the heterogeneous nature of the entities, in terms of size and origin of ownership, impacts on the interest rate agreed. Other additional aspects,...

Japan has experienced stagnation, deflation, and low interest rates for decades. It is caught in a liquidity trap. This paper examines Japan's liquidity trap in light of the structure and performance of the country's economy since the onset of stagnation. It also analyzes the country's liquidity...

This paper undertakes an empirical inquiry concerning the determinants of long-term interest rates on US Treasury securities. It applies the bounds testing procedure to cointegration and error correction models within the autoregressive distributive lag (ARDL) framework, using monthly data and...

Major central banks remunerate reserves at negative interest rates and it is increasingly likely that they will keep rates negative for many more years. To study the long run implications of negative rates, we construct a dynamic general equilibrium model with commercial banks funding investment...