Applications of an IS-MP Model with Yield Curve

X. Wang () and Bill Z. Yang ()
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Bill Z. Yang: Department of Finance and Economics, Georgia Southern University, Statesboro, GA 30460, USA

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2016, vol. 11, issue 1, 142-155

Abstract: This paper presents an IS-MP model with the term structure of interest rates (i.e., the yield curve) and discusses some of its applications to recent macroeconomic activities and policy issues. Specifically, the model is employed to explain (1) why a steepening yield curve may signal the subsequent economic expansion, (2) why long-term zero interest rate policy (ZIRP) may not completely avoid recessions, but disables the yield curve from being inverted to signal the following economic recession, (3) how Operation Twist (OT) may help ease the recession, in particular, under ZIRP, and what limit it may face.

Keywords: IS-MP model; yield curve; zero interest rate policy (ZIRP); Operation Twist (OT) (search for similar items in EconPapers)
JEL-codes: E32 E43 E52 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:fec:journl:v:11:y:2016:i:1:p:142-155

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