On the Informational Role of Term Structure in the U.S. Monetary Policy Rule

Jesús Vázquez Pérez, Ramón Maria-Dolores and Juan Miguel Londoño Yarce

No 1988-088X, DFAEII Working Papers from University of the Basque Country - Department of Foundations of Economic Analysis II

Abstract: This paper uses a structural approach based on the indirect inference principle to estimate a standard version of the new Keynesian monetary (NKM) model augmented with term structure using both revised and real-time data. The estimation results show that the term spread and policy inertia are both important determinants of the U.S. estimated monetary policy rule whereas the persistence of shocks plays a small but significant role when revised and real-time data of output and inflation are both considered. More importantly, the relative importance of term spread and persistent shocks in the policy rule and the shock transmission mechanism drastically change when it is taken into account that real-time data are not well behaved.

Keywords: NKM model; term structure; monetary policy rule; indirect inference; real-time (search for similar items in EconPapers)
Date: 2010-01
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Related works:
Journal Article: On the informational role of term structure in the US monetary policy rule (2013)
Working Paper: On the informational role of term structure in the U.S. monetary policy rule (2009)
Working Paper: On the informational role of term structure in the US monetary policy rule (2009)
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Dpto. de Fundamentos del Análisis Económico II, = Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain

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