The Expectations Hypothesis of the Term Structure of Interest Rates with Mean-reverting Expectations
(2009)Department of Economics
- Abstract
- As it is the main theoretical explanation for how short term interest rates affect long-term interest rates, the expectations hypothesis of the term structure of interest rates is closely linked to the effectiveness of monetary policy. By assuming expectations about short term interest rates are mean reverting, this paper shows that monetary policy is most effective when expectations only slowly mean revert. Through analysis of interest rate data in the frequency domain, interest rates are shown to be mean reverting in various countries, implying that monetary policy in those countries is only partially effective.
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/1580086
- author
- Cokayne, Greaeme
- supervisor
- organization
- year
- 2009
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- expectations, monetary policy, mean reverting, interest rates, Economics, econometrics, economic theory, economic systems, economic policy, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
- language
- English
- id
- 1580086
- date added to LUP
- 2009-10-29 00:00:00
- date last changed
- 2010-08-03 10:52:58
@misc{1580086, abstract = {{As it is the main theoretical explanation for how short term interest rates affect long-term interest rates, the expectations hypothesis of the term structure of interest rates is closely linked to the effectiveness of monetary policy. By assuming expectations about short term interest rates are mean reverting, this paper shows that monetary policy is most effective when expectations only slowly mean revert. Through analysis of interest rate data in the frequency domain, interest rates are shown to be mean reverting in various countries, implying that monetary policy in those countries is only partially effective.}}, author = {{Cokayne, Greaeme}}, language = {{eng}}, note = {{Student Paper}}, title = {{The Expectations Hypothesis of the Term Structure of Interest Rates with Mean-reverting Expectations}}, year = {{2009}}, }