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The Expectations Hypothesis of the Term Structure of Interest Rates with Mean-reverting Expectations

Cokayne, Greaeme (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.
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author
Cokayne, Greaeme
supervisor
organization
year
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},
  keyword      = {expectations,monetary policy,mean reverting,interest rates,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  language     = {eng},
  note         = {Student Paper},
  title        = {The Expectations Hypothesis of the Term Structure of Interest Rates with Mean-reverting Expectations},
  year         = {2009},
}