Equilibrium Yield Curve, the Phillips Curve, and Monetary Policy

2018 ◽  
Author(s):  
Mitsuru Katagiri
Keyword(s):  
Monetary Policy ◽  
Phillips Curve ◽  
Yield Curve ◽  
Equilibrium Yield

The Equilibrium Yield Curve for Government Securities

1979 ◽  
Vol 35 (3) ◽  
pp. 31-39 ◽  
Author(s):  
Herbert F. Ayres ◽  
John Y. Barry
Keyword(s):  
Yield Curve ◽  
Equilibrium Yield

scholarly journals The Unpleasant Arithmetic of the Taylor Rule

2020 ◽  
Vol 8 (3) ◽  
pp. p89
Author(s):  
Alejandro Rodriguez-Arana
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Phillips Curve ◽  
Taylor Rule ◽  
Independent Component ◽  
Elasticity Of Substitution ◽  
Interest Rate Rule

This paper analyzes the effect of a monetary policy that raises the reference interest rate in order to reduce inflation in a situation where the fiscal policy parameters remain constant. In an overlapping generation’s model and in the presence of an accelerationist Phillips curve and a Taylor rule of interest rates, it is observed that increasing the independent component of said rule leads to a solution that at least in a large number of cases is unstable. In the case where the elasticity of substitution is greater than one, inflation falls temporarily, but then it can increase in an unstable manner. One way to achieve stability is to establish an interest rate rule where Taylor’s principle is not met. However, in this case many times the increase in the independent component of this rule will generate greater long-term inflation.

scholarly journals Monetary Policy Surprises over Time

2018 ◽  
Vol 08 (01) ◽  
pp. 1840002 ◽  
Author(s):  
Marcello Pericoli ◽  
Giovanni Veronese
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Interest Rates ◽  
Euro Area ◽  
Yield Curve ◽  
Sovereign Spreads ◽  
Definition Of ◽  
Term Premia ◽  
The Impact ◽  
Over Time

We document how the impact of monetary surprises on euro-area and US financial markets has changed from 1999 to date. We use a definition of monetary policy surprises, which singles out movements in the long-end of the yield curve — rather than those changing nearby futures on the central bank reference rates. By focusing only on this component of monetary policy, our results are more comparable over time. We find a hump-shaped response of the yield curve to monetary policy surprises, both in the pre-crisis period and since 2013. During the crisis years, Fed path-surprises, largely through their effect on term premia, account for the impact on interest rates, which is found to be increasing in tenor. In the euro area, the path-surprises reflect the shifts in sovereign spreads, and have a large impact on the entire constellation of interest rates, exchange rates and equity markets.

ROBUST POLICIES IN A STICKY INFORMATION ECONOMY

2010 ◽  
Vol 14 (3) ◽  
pp. 311-342 ◽  
Author(s):  
Francesco Giuli
Keyword(s):  
Monetary Policy ◽  
Phillips Curve ◽  
Rational Expectation ◽  
Policy Instrument ◽  
Optimal Monetary Policy ◽  
Information Economy ◽  
Sticky Information ◽  
Productivity Shocks ◽  
Expectation Model ◽  
Short Run

This paper analyzes the behavior of a central bank under strong (“Knightian”) uncertainty when the short-run trade-off between output and inflation is represented by the sticky information Phillips curve proposed by Mankiw and Reis [Quarterly Journal of Economics 117(4), 1295–1328 (2002)]. By solving the robust control problem analytically, we show why model uncertainty does not affect the optimal monetary policy response to demand and productivity shocks, whereas it causes a stronger reaction of the monetary policy instrument to a cost-push (i.e., markup) shock. Differently from what occurs in sticky price models, the antiattenuation effect can result in a degree of price level stabilization that is greater or less than that experienced in the rational expectation model, depending on the central bank's degree of conservatism. These results dramatically affect the rationale for delegating monetary policy to a central banker more conservative than the society.

scholarly journals Can Agents with Causal Misperceptions be Systematically Fooled?

2019 ◽  
Vol 18 (2) ◽  
pp. 583-617 ◽  
Author(s):  
Ran Spiegler
Keyword(s):  
Monetary Policy ◽  
Bayesian Networks ◽  
Directed Acyclic Graph ◽  
Phillips Curve ◽  
Causal Model ◽  
Expected Value ◽  
Prediction Errors ◽  
Acyclic Graph ◽  
Long Run ◽  
Individual Variables

Abstract An agent forms estimates (or forecasts) of individual variables conditional on some observed signal. His estimates are based on fitting a subjective causal model—formalized as a directed acyclic graph, following the “Bayesian networks” literature—to objective long-run data. I show that the agent’s average estimates coincide with the variables’ true expected value (for any underlying objective distribution) if and only if the agent’s graph is perfect—that is, it directly links every pair of variables that it perceives as causes of some third variable. This result identifies neglect of direct correlation between perceived causes as the kind of causal misperception that can generate systematic prediction errors. I demonstrate the relevance of this result for economic applications: speculative trade, manipulation of a firm’s reputation, and a stylized “monetary policy” example in which the inflation-output relation obeys an expectational Phillips Curve.

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