Euler equations and money market interest rates: The role of monetary policy and risk premium shocks

Johannes Gareis () and Eric Mayer

Economics Letters, 2013, vol. 120, issue 1, 27-31

Abstract: We challenge the view that the negative correlation between the Federal Funds and the Euler equation interest rate is linked to monetary policy. Using Monte Carlo experiments, we show that the negative correlation can be explained by risk premium disturbances.

Keywords: Euler interest rate; Monetary policy; Risk premium shocks (search for similar items in EconPapers)
JEL-codes: E10 E43 E44 E52 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:120:y:2013:i:1:p:27-31

DOI: 10.1016/j.econlet.2013.03.025

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