EconPapers    
Economics at your fingertips  
 

Fisher's Relation and the Term Structure: Implications for IS Curves

Christopher Malikane () and Kalu Ojah ()

MPRA Paper from University Library of Munich, Germany

Abstract: We derive the new Keynesian IS curve from the Fisher relation and the expectations theory of the term structure, without reference to household preferences. We show that, under certain conditions, parameters of the empirical new Keynesian IS curves need not be estimated but can be calibrated from observed data. We specifically show that the coefficient of relative risk aversion is the steady-state consumption-output ratio and that the interest rate effect on output can be reasonably approximated by the inverse of the average term to maturity of debt instruments. We highlight the implications of these findings for macroeconomic modelling and estimation.

Keywords: IS curve; no-arbitrage; Fisher relation; expectations theory of the term structure. (search for similar items in EconPapers)
JEL-codes: E4 E43 E44 (search for similar items in EconPapers)
Date: 2014-04-26
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/55553/1/MPRA_paper_55553.pdf original version (application/pdf)

Related works:
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:pra:mprapa:55553

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

 
Page updated 2021-03-28
Handle: RePEc:pra:mprapa:55553