Monetary Policy and the Fisher Effect

6 Pages Posted: 2 Jun 2009 Last revised: 11 Jun 2013

Date Written: March 4, 1999

Abstract

Historical estimates of the informational content in the yield curve may not be relevant after a change in monetary policy. This study uses a small dynamic rational expectations model with staggered price setting to study how monetary policy affects the relation between nominal interest rates, inflation expectations, and real interest rates. The benchmark parameters, including the Fed's loss function parameters, are estimated by maximum likelihood on quarterly U.S. data. The policy experiments include stronger inflation targeting and more active monetary policy.

Keywords: optimal monetary policy, inflation expectations, forward interest rates, Kalman filter estimation

JEL Classification: E31, E43, E52

Suggested Citation

Söderlind, Paul, Monetary Policy and the Fisher Effect (March 4, 1999). Journal of Policy Modeling, Vol. 23, pp. 491-495, 2001, Available at SSRN: https://ssrn.com/abstract=1413214 or http://dx.doi.org/10.2139/ssrn.1413214

Paul Söderlind (Contact Author)

University of St. Gallen ( email )

Rosenbergstrasse 52
St. Gallen, 9000
Switzerland
+41 71 224 7064 (Phone)
+41 71 224 7088 (Fax)

HOME PAGE: http://https://sites.google.com/site/paulsoderlindecon/home

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