Short and Long Interest Rate Targets

Bernardino Adao () and Pedro Teles
Authors registered in the RePEc Author Service: Isabel Correia ()

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: We show that short and long nominal interest rates are independent monetary policy instruments. The pegging of both helps solving the problem of multiplicity that arises when only short rates are used as the instrument of policy. A peg of the nominal returns on assets of different maturities is equivalent to a peg of state-contingent interest rates. These are the rates that should be targeted in order to implement unique equilibria. At the zero bound, while it is still possible to target state-contingent interest rates, that is no longer equivalent to the target of the term structure.

JEL-codes: E3 E4 E5 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://www.bportugal.pt/sites/default/files/anexos/papers/wp201015.pdf

Related works:
Journal Article: Short and long interest rate targets (2014)
Working Paper: Short and Long Interest Rate Targets (2012)
Working Paper: Short and Long Interest Rate Targets (2010)
Working Paper: Short and long interest rate targets (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w201015

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