Equilibrium Yield Curve, the Phillips Curve, and Monetary Policy

Mitsuru Katagiri

Journal of Money, Credit and Banking, 2022, vol. 54, issue 8, 2235-2272

Abstract: Upward‐sloping yield curves are hard to reconcile with the positive relationship between income and inflation (the Phillips curve) in consumption‐based asset pricing models. Using the U.S. and the UK data, this paper shows inflation is negatively correlated with long‐run income growth but positively correlated with cyclical income, thus enabling the model to replicate positive and sizable term premiums, along with the Phillips curve over business cycles. According to the model, a permanently low‐growth and low‐inflation environment would precipitate flatter yield curves due to constraints to monetary policy around the zero lower bound.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1111/jmcb.12919

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:wly:jmoncb:v:54:y:2022:i:8:p:2235-2272

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().