The Changing Behavior of the Term Structure of Interest Rates

N. Gregory Mankiw and Jeffrey Miron ()

No 1669, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We reexamine the expectations theory of the term structure using data at the short end of the maturity spectrum. We find that prior to the founding ofthe Federal Reserve System in 1915, the spread between long rates and short rates has substantial predictive power for the path of interest rates; after 1915, however, the spread contains much less predictive power. We then show that the short rate is approximately a random walk after the founding of the Fed but not before. This latter fact, coupled with even slight variation inthe term premium, can explain the observed change in 1915 in the performance of the expectations theory. We suggest that the random walk character of the short rate may be attributable to the Federal Reserve's commitment to stabilizing interest rates.

Date: 1985-07
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (153)

Published as Mankiw, N. Gregory and Jeffrey Miron. "The Changing Behavior of the Term Structure of Interest Rates." Quarterly Journal of Economics, Vol. CI, No. 2 , (May 1986), pp. 211-228.

Downloads: (external link)
http://www.nber.org/papers/w1669.pdf (application/pdf)

Related works:
Journal Article: The Changing Behavior of the Term Structure of Interest Rates (1986)
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:nbr:nberwo:1669

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1669

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().