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

2003 ◽  
Author(s):  
Glenn D. Rudebusch ◽  
Tao Wu
Keyword(s):  
Monetary Policy ◽  
Term Structure ◽  
Finance Model ◽  
Macro Finance

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

2004 ◽  
pp. 1.000-48.000 ◽  
Author(s):  
Glenn D. Rudebusch ◽  
◽  
Tao Wu ◽  
Keyword(s):  
Monetary Policy ◽  
Term Structure ◽  
Finance Model ◽  
Macro Finance

Understanding the Impact of Monetary Policy in Korea using a Macro-Finance Term Structure Model with

2014 ◽  
Vol 22 (2) ◽  
pp. 161-192
Author(s):  
Woon Wook Jang ◽  
Jaehoon Hahn
Keyword(s):  
Monetary Policy ◽  
Term Structure ◽  
Yield Curve ◽  
Call Rate ◽  
Monetary Policy Shocks ◽  
Macroeconomic Factors ◽  
Term Structure Model ◽  
Term Premium ◽  
Policy Shocks ◽  
Macro Finance

This paper examines the interaction between monetary policy and the macroeconomy using a macro-finance term structure model of Joslin, Priebsch, and Singleton (2012), in which macroeconomic risks are not assumed to be spanned by information about the shape of the yield curve. For model estimation, we apply the Kalman filter to a large number of macroeconomic time series data grouped into output, inflation, and market stress categories and extract three common factors. For the factors determining the shape of the yield curve, we use the call rate, the spread between 10-year government bond yield and the call rate, and a combination of the call rate, 2- and 10-year government bond yields as proxies for the level, slope, and curvature factors. We interpret the call rate as a proxy for both the short rate and the instrument of monetary policy. Empirical results show that the macroeconomic factors have a significant impact on the risk premium associated with monetary policy shocks. Furthermore, we find that monetary policy shocks increase the term premium, which in turn affects the factors determining the yield curve, and such effects on the shape of the yield curve feeds back into the macroeconomic factors. Taken together, empirical findings in this paper can be interpreted as evidence supporting the term premium channel (Ferman, 2011) of monetary policy transmission mechanism.

Central Bank Liquidity Management and the Signal Extraction Problem on the Money Market / Die Liquiditätssteuerung der Notenbank und das Signal-extraktionsproblem am Geldmarkt

2000 ◽  
Vol 220 (3) ◽  
pp. 284-301
Author(s):  
Ulrich Bindseil
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Term Structure ◽  
Management Strategies ◽  
Money Market ◽  
Signal Extraction ◽  
Maintenance Period ◽  
Liquidity Management ◽  
Expectation Theory

Summary Understanding the factors determining overnight rates is crucial both for central bankers and private market participants, since, assuming the validity of the expectation theory of the term structure of interest rates, expectations with regard to this “monadic” maturity should determine longer term rates, which are deemed to be relevant for the transmission of monetary policy. The note proposes a simple model of the money market within a two-day long reserve maintenance period to derive relationships between the relevant quantities, expectations concerning these quantities for the rest of the reserve maintenance period, and overnight rates. It is argued that a signal extraction problem faced by banks when observing quantities such as their aggregate reserve holdings and allotment amounts of monetary policy operations is at the core of these relationships. The usefulness of the model is illustrated by applying it to the analysis of three alternative liquidity management strategies of a central bank.

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