Modelling the Duration of Interest Rate Spells Under Inflation Targeting in Canada

Ruby Shih () and David Giles
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Ruby Shih: Department of Economics, University of Victoria, https://www.uvic.ca/socialsciences/economics/

No 605, Econometrics Working Papers from Department of Economics, University of Victoria

Abstract: We use survival models to analyze the duration of the spells associated with the interest rate used by the Bank of Canada as its monetary policy instrument. Both non-parametric and parametric models are estimated, allowing for right-censoring of the data, and time-varying covariates. We find that the data are explained well by an accelerated failure time Weibull model, with the annual rate of inflation and the quarterly rate of growth in GDP as covariates. The model indicates that there is positive duration dependence in the interest rate spells, and that unemployment and exchange rate effects are insignificant.

Keywords: Inflation target; survival analysis; monetary policy (search for similar items in EconPapers)
JEL-codes: C14 C42 E43 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2006-09-08
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-mac and nep-mon
Note: ISSN 1485-6441
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:vic:vicewp:0605

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