Do long term interest rates drive GDP and inflation in small open economies? Evidence from Poland

Grzegorz Wesołowski

No 242, NBP Working Papers from Narodowy Bank Polski

Abstract: I show that the long term interest rate that includes a time-varying term premium stabilizes GDP and it does not affect significantly inflation volatility in Poland. I derive this result from an estimated DSGE model of a small open economy. GDP volatility would have been much higher if the endogenous part of the term premium had been switched off in the model, while the inflation volatility has not been affected by the presence of the term premium. At the same time, the term premium shock had only a minor impact on GDP and inflation volatilities which suggests that the QE programs conducted by the major central banks did not have a substantial impact on the Polish economy.

Keywords: long term interest rates; time-varying term premium; business cycle; small open economy (search for similar items in EconPapers)
JEL-codes: E32 E43 E44 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cse, nep-dge, nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Do long-term interest rates drive GDP and inflation in small open economies? Evidence from Poland (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:242

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