Uncertainty on Monetary Policy and the Expectational Model of the Term Structure of Interest Rates

Carlo Favero and Federico Mosca

No 2748, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In this Paper we estimate jointly a forward-looking reaction function for the three-month rate along with a term structure relationship linking the six-month interest rates to current and expected future three-month rates. In our empirical model the response of the six-month interest rates to current and future three-month interest rates is allowed to depend on uncertainty on monetary policy. The expectation theory cannot be rejected in periods of low uncertainty on monetary policy.

Keywords: Forward-looking reaction functions; Term structure of interest rates; Expectations model (search for similar items in EconPapers)
JEL-codes: E44 E52 F41 (search for similar items in EconPapers)
Date: 2001-03
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Uncertainty on monetary policy and the expectations model of the term structure of interest rates (2001)
Working Paper: Uncertainty on Monetary Policy and the Expectations Model of the Term Structure of Interest Rates
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