Central Bank Policy Reaction and the Expectations Hypothesis of the Term Structure

Peter Kugler

International Journal of Finance & Economics, 1997, vol. 2, issue 3, 217-24

Abstract: This paper applies the monetary policy reaction model developed by McCallum to the term structure of interest rates. First, it contains the solution of a rational expectations model of the central bank policy reaction, with respect to the current long short-spread for the N period long rate case. Second, it applies this model rather successfully to recent weekly data for four countries. Copyright @ 1997 by John Wiley & Sons, Ltd. All rights reserved.

Date: 1997
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