Term Structure Rules for Monetary Policy

Mariano Kulish

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: This paper studies two types of interest rate rules that involve long-term nominal interest rates in the context of a New Keynesian model. The first type considers the possibility of adding longer-term rates to the list of variables the central bank reacts to in setting its short-term rate. The second type considers Taylor-type rules that are expressed in terms of interest rates of different maturities, which are operationally equivalent to more complex rules expressed in terms of the short-term rate. It is shown that both types of rules can give rise to a unique rational expectations equilibrium in large regions of the policy-parameter space. The normative evaluation shows that under certain preferences of the monetary authority, policy rules of the second type produce better results than the standard Taylor-type rule.

Keywords: term structure of interest rates; monetary policy rules (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 (search for similar items in EconPapers)
Date: 2006-04
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:

Downloads: (external link)
https://www.rba.gov.au/publications/rdp/2006/pdf/rdp2006-02.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rba:rbardp:rdp2006-02

Access Statistics for this paper

More papers in RBA Research Discussion Papers from Reserve Bank of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Paula Drew ().