A Keynesian Approach to Modeling the Long-Term Interest Rate

Tanweer Akram

Economics Working Paper Archive from Levy Economics Institute

Abstract: There are several widely used benchmark models of the long-term interest rate in quantitative finance. However, these models have yet to incorporate Keynes's valuable insights about interest rate dynamics. The Keynesian approach to interest rate dynamics can be readily incorporated in the benchmark models of the long-term interest rate. This paper modifies several benchmark interest rate models. In these modified models the long-term interest rate is related to the short-term interest rate and a Wiener process. The Keynesian approach to interest rate dynamics can be useful in addressing theoretical and policy issues.

Keywords: Long-Term Interest Rate; Bond Yields; Monetary Policy; Short-Term Interest Rate; John Maynard Keynes (search for similar items in EconPapers)
JEL-codes: E12 E43 E50 E58 E60 G10 G12 G41 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-his, nep-mac, nep-mon and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:lev:wrkpap:wp_988

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