The aggregate demand effects of short- and long-term interest rates

Michael Kiley

No 2012-54, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: I develop empirical models of the U.S. economy that distinguish between the aggregate demand effects of short- and long-term interest rates-one with clear \"microfoundations\" and one more loosely motivated. These models are estimated using government and private long-term bond yields. Estimation results suggest short- and long-term interest rates both influence aggregate spending. The results indicate that the short-term interest rate has a larger influence on economic activity, through its impact on the entire term structure, than term and risk premiums (for equal-sized movements in long-term interest rates). Potential policy implications are discussed.

Date: 2012
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (13)

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Related works:
Journal Article: The Aggregate Demand Effects of Short- and Long-Term Interest Rates (2014)
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