scholarly journals Monetary Policy Regime Shifts and the Unusual Behavior of Real Interest Rates

10.3386/w1678 ◽  
1985 ◽  
Author(s):  
John Huizinga ◽  
Frederic Mishkin
Author(s):  
Azamat Abdymomunov ◽  
Kyu Ho Kang

AbstractWe investigate how the entire term structure of interest rates is influenced by changes in monetary policy regimes. To do so, we develop and estimate an arbitrage-free dynamic term-structure model which accounts for regime shifts in monetary policy and price of risk. Our results for US data from 1985 through 2008 indicate that (


2018 ◽  
Vol 5 (6) ◽  
pp. 84
Author(s):  
Fernando Ferrari Filho ◽  
Marcelo Milan

Brazil has had, since the middle 1990s, one of the highest real interest rates in the world, yet not one of the lowest inflation rates. By the end of that decade, an inflation targeting regime (ITR) was introduced. Real interest rates have remained extremely high for international standards, while macroeconomic performance has been dismal on the same grounds. This article argues that these results can be explained by, among others reasons, pressures from the rentiers to frame monetary policy in a way to sustain very high interest earnings in a context where inflation is not very sensitive to monetary policy instruments. Under the ITR, the interest rate seems to have been kept above what would be required to maintain low inflation under normal conditions (even if one assumes a demand-pull inflation, which is not necessarily the case), with a potentially negative impact on growth and employment. This is interpreted as an indicator of monetary policy ineffectiveness. On the empirical ground, this article compares interest rate, inflation, unemployment, and real output growth for Brazil with both ITR and non-ITR countries selected by judgment sampling.


Sign in / Sign up

Export Citation Format

Share Document