Excess Volatility and the Smoothing of Interest Rates
Author : Steven Strongin
Publisher :
Page : 34 pages
File Size : 39,18 MB
Release : 1992
Category : Interest rates
ISBN :
Author : Steven Strongin
Publisher :
Page : 34 pages
File Size : 39,18 MB
Release : 1992
Category : Interest rates
ISBN :
Author : Pieter Cornelis Schotman
Publisher :
Page : 80 pages
File Size : 11,24 MB
Release : 1991
Category : Interest rates
ISBN :
Author : Peter Schotman
Publisher :
Page : 46 pages
File Size : 39,63 MB
Release : 1990
Category :
ISBN :
Author : Pieter Cornelis Schotman
Publisher :
Page : 0 pages
File Size : 12,42 MB
Release : 1991
Category :
ISBN :
Author : Brian Sack
Publisher :
Page : 54 pages
File Size : 31,78 MB
Release : 1999
Category : Interest rates
ISBN :
Author : Diogo Duarte
Publisher :
Page : 48 pages
File Size : 10,31 MB
Release : 2018
Category :
ISBN :
We introduce a macro-finance model in which monetary authorities adjust the money supply by targeting not only output and inflation but also the slope of the yield curve. We study the impact of McCallum-type rules on capital growth, the volatility of interest rates, the spread between long- and short-term rates, the persistence of monetary shocks and equity volatility. Our model supports the Federal Reserve's choice to incorporate financial data in their policy decisions and expand the monetary base to decrease the nominal interest rate spread at the cost of lower expected long-term growth.
Author : Peter Schotman
Publisher :
Page : 46 pages
File Size : 12,65 MB
Release : 1990
Category :
ISBN :
Author : Stefan Gerlach
Publisher :
Page : 42 pages
File Size : 26,9 MB
Release : 1996
Category : Capital market
ISBN :
Author : Gianluca Benigno
Publisher :
Page : 72 pages
File Size : 15,68 MB
Release : 2001
Category : Foreign exchange rates
ISBN :
Author : R. Todd Smith
Publisher :
Page : 32 pages
File Size : 23,22 MB
Release : 2004
Category :
ISBN :
Central banks smooth fluctuations in interest rates based on a belief that this policy promotes financial stability. This belief is based on a presumption that the direct effect of less interest rate volatility on a bank's likelihood of insolvency is the predominant effect of this policy. The main point of this paper is that these policies also give rise to indirect effects that lower financial stability. These indirect effects occur because the policy itself alters bank behavior. In effect, if the central bank provides (liquidity) insurance (at zero premia), it may introduce a classic moral hazard problem that encourages risk-taking by banks. As a result, to maintain a given degree of financial stability, a bank regulator may, in fact, need to impose a higher prudential capital requirement when an interest rate smoothing policy is in place. The paper concludes that the link between interest rate smoothing policy and financial stability may be more complicated than is generally recognized.