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Financial shocks and the maturity of the monetary policy rate

Petra Gerlach-Kristen () and Barbara Rudolf ()

Economics Letters, 2010, vol. 107, issue 3, 333-337

Abstract: Monetary policy is typically formulated with a very short-term interest rate, while longer rates matter in the transmission mechanism. We show that financial market shocks impact less on the macroeconomy if policy is set with a longer rate.

Keywords: Monetary; policy; framework; Maturity; of; the; policy; interest; rate; Financial; shocks; Three-month; libor (search for similar items in EconPapers)
Date: 2010
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Handle: RePEc:eee:ecolet:v:107:y:2010:i:3:p:333-337