The fed and the term structure: Addressing simultaneity within a structural VAR model

Mira Farka (efarka@fullerton.edu) and Amadeu DaSilva

Journal of Empirical Finance, 2011, vol. 18, issue 5, 935-952

Abstract: This paper applies a new identification approach to estimate the contemporaneous relation between the term structure and monetary policy within a VAR framework. To achieve identification, we combine high-frequency Treasury futures and fed funds futures data with the VAR methodology. Results indicate that policy actions have a slope effect in the yield curve. We also find that the Fed responds to Treasury yields and that this response is stronger for the short and intermediate rates and less aggressive for long-yields. All estimated parameters are significant and robust to various model specifications.

Keywords: Monetary policy; Term structure of interest rates; Structural VAR; Identification (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 G14 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927539811000636
Full text for ScienceDirect subscribers only

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:eee:empfin:v:18:y:2011:i:5:p:935-952

DOI: 10.1016/j.jempfin.2011.08.004

Access Statistics for this article

Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

More articles in Journal of Empirical Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).