[PDF] Heterogenous Information About The Term Structure Of Interest Rates Least Squares Learning And Optimal Interest Rate Rules eBook

Author : Eric Schaling
Publisher :
Page : 53 pages
File Size : 38,54 MB
Release : 2007
Category :
ISBN :

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In this paper, we incorporate the term structure of interest rates in a standard inflation forecast targeting framework. Learning about the transmission process of monetary policy is introduced by having heterogeneous agents - i.e., the central bank and private agents - who have different information sets about the future sequence of short-term interest rates. We analyse inflation forecast targeting in two environments. One in which the central bank has perfect knowledge, in the sense that it understands and observes the process by which private sector interest rate expectations are generated, and one in which the central bank has imperfect knowledge and has to learn the private sector forecasting rule for short-term interest rates. In the case of imperfect knowledge, the central bank has to learn about private sector interest rate expectations, as the latter affect the impact of monetary policy through the expectations theory of the term structure of interest rates. Here, following Evans and Honkapohja (2001), the learning scheme we investigate is that of least-squares learning (recursive OLS) using the Kalman filter. We find that optimal monetary policy under learning is a policy that separates estimation and control. Therefore, this model suggests that the practical relevance of the breakdown of the separation principle and the need for experimentation in policy may be limited.

Author : Rajna Gibson
Publisher : Now Publishers Inc
Page : 171 pages
File Size : 32,28 MB
Release : 2010
Category : Business & Economics
ISBN : 1601983727

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Modeling the Term Structure of Interest Rates provides a comprehensive review of the continuous-time modeling techniques of the term structure applicable to value and hedge default-free bonds and other interest rate derivatives.

Author : Burton Gordon Malkiel
Publisher : Princeton University Press
Page : 294 pages
File Size : 11,39 MB
Release : 2015-12-08
Category : Business & Economics
ISBN : 1400879787

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Can expectations alone explain the yield differentials among bonds of different maturities? To what extend do attitudes toward risk and transactions costs influence the behavior of bond investors? Is it possible for the Federal Reserve to "twist" the interest-rate structure in accordance with its policy objectives? These are among the questions treated. Originally published in 1966. The Princeton Legacy Library uses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These editions preserve the original texts of these important books while presenting them in durable paperback and hardcover editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

Author : Mr.Vadim Khramov
Publisher : International Monetary Fund
Page : 27 pages
File Size : 13,49 MB
Release : 2013-10-17
Category : Business & Economics
ISBN : 147559464X

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This paper sheds light on a narrow but crucial question in finance: What should be the parameters of a model of the short-term real interest rate? Although models for the nominal interest rate are well studied and estimated, dynamics of the real interest rate are rarely explored. Simple ad hoc processes for the short-term real interest rate are usually assumed as building blocks for more sophisticated models. In this paper, parameters of the real interest rate model are estimated in the broad class of single-factor interest rate diffusion processes on U.S. monthly data. It is shown that the elasticity of interest rate volatility—the relationship between the volatility of changes in the interest rate and its level—plays a crucial role in explaining real interest rate dynamics. The empirical estimates of the elasticity of the real interest rate volatility are found to be about 0.5, much lower than that of the nominal interest rate. These estimates show that the square root process, as in the Cox-Ingersoll-Ross model, provides a good characterization of the short-term real interest rate process.

Author : Ken O. Kortanek
Publisher : John Wiley & Sons
Page : 248 pages
File Size : 16,95 MB
Release : 2001-11-28
Category : Business & Economics
ISBN :

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This book offers a new approach to interest rate and modeling term structure by using models based on optimization of dynamical systems, rather than the traditional stochastic differential equation models. The authors use dynamic models to estimate the term structure of interest rates and show the reader how to build their own numerical simulations. It includes software that will enable readers to simulate the various models covered in the book.