Monetary Policy and the Fisher Effect

Paul Söderlind

No 1610, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Historical estimates of the Fisher effect and the informational content in the yield curve may not be relevant after a change in monetary policy. This paper uses a small dynamic rational expectations model with staggered price setting to study how central bank preferences (and thereby monetary policy) affect the relation between nominal interest rates, inflation expectations, and real interest rates. The benchmark parameters, including the Federal Reserve Bank’s loss function parameters, are estimated by maximum likelihood on quarterly US data. The policy experiments include stronger inflation targeting, more active monetary policy, and a change in commitment technology.

Keywords: Fisher Effect; Inflation Expectations; Interest Rates; Kalman Filter Estimation; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E31 E43 E52 (search for similar items in EconPapers)
Date: 1997-03
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Monetary policy and the Fisher effect (2001)
Working Paper: Monetary Policy and the Fisher Effect (1999)
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