A Macro-Finance Model of the Term Structure, Monetary Policy, and the Economy

Glenn Rudebusch and Tao Wu ()

No 2003-17, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: This paper develops and estimates a macro-finance model that combines a canonical affine no-arbitrage finance specification of the term structure with standard macroeconomic aggregate relationships for output and inflation. From this new empirical formulation, we obtain several interesting results: (1) the latent term structure factors from finance no-arbitrage models appear to have important macroeconomic and monetary policy underpinnings, (2) there is no evidence of monetary policy inertia or a slow partial adjustment of the policy interest rate by the Federal Reserve, and (3) both forward-looking and backward-looking elements play important roles in macroeconomic dynamics.

Keywords: Monetary policy; Econometric models; Inflation (Finance) (search for similar items in EconPapers)
Pages: 48
Date: 2003-12-01
Note: PDF date: December 2004. First draft: September 2003.
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Citations: View citations in EconPapers (14)

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Related works:
Journal Article: A Macro-Finance Model of the Term Structure, Monetary Policy and the Economy (2008)
Journal Article: A Macro‐Finance Model of the Term Structure, Monetary Policy and the Economy (2008)
Working Paper: A Macro-Finance Model of the Term Structure, Monetary Policy, and the Economy (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2003-17

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DOI: 10.24148/wp2003-17

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