Fiscal policy and the term structure of interest rates dhqzgdb

Fiscal policy and the term structure of interest rates

11.11.2020

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A central point of the papers by Gale and Orszag (2002) and Laubach (2009) is that the response of interest rates (especially of long maturities) to fiscal policy depends on expectations about the future course of fiscal policy. In the term structure model (s) Demmel R. (1999) Term structure of interest rates and fiscal policy. In: Fiscal Policy, Public Debt and the Term Structure of Interest Rates. Lecture Notes in Economics and Mathematical Systems, vol 476. 1 Motivation Fiscal policy and financial market reactions are increasingly receiving world wide attention. The most recent examples are the Maastricht criteria about flScal control, the South-East Asia financial crisis and the resulting IMF policy stance, the high level of public debt in developed and developing countries and the effect on interest rates and economic growth. The response of the economy to tax shocks, in terms of both prices and quantities, does not appear consistent with Ricardian equivalence in the short and medium run. Fiscal policy is neutral in the long run by assumption, since our model is stationary in the level of interest rates and detrended taxes and spending.

15 Feb 2017 unconventional, monetary policy on the term structure of interest rates.1 ment It, a lump-sum tax Tt, and holding of a one-period bond bt which

Our results suggest that (i) government deficits affect long term interest rates: a one percentage point increase in the deficit to GDP ratio, lasting for 3 years, will

An interest rate is the amount of interest due per period, as a proportion of the amount lent, However, a low interest rate as a macro-economic policy can be risky and Political short-term gain: Lowering interest rates can give the economy a 1 year, and they receive interest of $10 (before tax), so at the end of the year, 24 Nov 2010 Transmission of policy rate changes to the whole structure of interest rates is thus effective. In practice, however, uncertainty about the path of Fiscal Policy, Public Debt and the Term Structure of Interest Rates developed and developing countries and the effect on interest rates and economic growth. 17 Aug 2017 Any macrofinancial analysis of the term structure of interest rates When monetary policy in the context of sticky prices moves the real rate, that The authors. administrator in the Monetary and Fiscal Policy Division and consultant in the Balance of expectations theory of the term structure of interest rates.

6 Feb 2017 The simplest model of the term structure of interest rates is the expectations and fiscal policy analyses do not explicitly model term premiums.

17 Aug 2017 Any macrofinancial analysis of the term structure of interest rates When monetary policy in the context of sticky prices moves the real rate, that The authors. administrator in the Monetary and Fiscal Policy Division and consultant in the Balance of expectations theory of the term structure of interest rates. 26 Sep 2019 Monetary policy has a significant effect on long-term interest rates and interest rates and shocks to peso-dollar exchange rate and budget Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects 8 Sep 2014 Government spending news and the term structure of interest rates In the effect of a fiscal policy shock on the term structure of interest rates In addition, many central banks, in particular those which target inflation directly, use forward interest rates computed on the basis of the term structure of interest. 6 Feb 2017 The simplest model of the term structure of interest rates is the expectations and fiscal policy analyses do not explicitly model term premiums.

In the United States, the Treasury yield curve (or term structure) is the first mover of all domestic interest rates and an influential factor in setting global rates. Interest rates on all other

1 Motivation Fiscal policy and financial market reactions are increasingly receiving world wide attention. The most recent examples are the Maastricht criteria about flScal control, the South-East Asia financial crisis and the resulting IMF policy stance, the high level of public debt in developed and developing countries and the effect on interest rates and economic growth. The response of the economy to tax shocks, in terms of both prices and quantities, does not appear consistent with Ricardian equivalence in the short and medium run. Fiscal policy is neutral in the long run by assumption, since our model is stationary in the level of interest rates and detrended taxes and spending. affect long term interest rates: a one percentage point increase in the deficit to GDP ratio, lasting for 3 years, will eventually increase the 10-year rate by 40--50 basis points; (ii) this increase is partly due This paper examines the impact of fiscal policy in a non-monetary, one-factor, multi-period, neoclassical model with uncertainty. It shows that a countercyclical change in fiscal policy tends to reduce the instability in the economy and, in so doing, lowers the premium of long-term over short-term interest rates (the term structure premium) when the policy goes into effect at the time of the Abstract. Macroeconomists want to understand the effects of fiscal policy on interest rates, while financial economists look for the factors that drive the dynamics of the yield curve.