Browsing by Subject "korkojen aikarakenne"

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  • Marzo, Massimiliano; Romagnoli, Silvia; Zagaglia, Paolo (2008)
    Bank of Finland Research Discussion Papers 25/2008
    We study the term structure implications of the fiscal theory of price level determination. We introduce the intertemporal budget constraint of the government in a general equilibrium model in continuous time. Fiscal policy is set according to a simple rule whereby taxes react proportionally to real debt. We show how to solve for the prices of real and nominal zero coupon bonds. Keywords: bond pricing, fiscal policy, mathematical methods JEL classification numbers: D9, G12
  • Kortela, Tomi (2016)
    Bank of Finland Research Discussion Papers 19/2016
    Typically a constant – or zero – lower bound for interest rates is applied in shadow rate term structure models. However, euro area yield curve data suggest that a time-varying lower bound might be appropriate for the euro area. I show that this indeed is the case, i.e. a shadow rate model with time-varying lower bound outperforms the constant lower bound model in euro area data. I argue that the time-variation in the lower bound is related to the deposit facility rate and, thus, to monetary policy. This time-variation in the lower bound gives a new channel via which monetary policy may affect the yield curve in a shadow rate model. I show that the intensity of this channel depends on how tightly the lower bound restricts the yield curve, and I argue that this channel has recently become important for the euro area.
  • Jääskelä, Jarkko; Vilmunen, Jouko (1999)
    Suomen Pankin keskustelualoitteita 12/1999
    This paper investigates the measurement of anticipated interest rate policy and the effects of these expectations on the term structure of nominal interest rates.It is shown that, under the expectations hypothesis, the level of long-term interest rates depends on three factors: the level of the monetary policy interest rate, ie the steering rate; the spread between the market interest rate and the steering rate; and market expectations of the next steering rate change.The theoretical model builds on the assumption that market participants have only imperfect knowledge of the mechanism whereby changes in the steering rate are determined.As a consequence, expectations formation, although realistic, need not be entirely rational.Steering rate changes take the form of discrete jumps and occur infrequently on a daily scale.Given these assumptions, discussion of the determination of the term structure is related to the literature on uncertainty about monetary policy regimes and small samples, ie "peso" problems. Empirical analysis based on Nelson-Siegel estimates of the daily yield curves in Finland in the period 1 January 1993 to 31 October 1997 complements the theoretical discussion.The observed differences between estimated market expectations and actual tender rate changes are quite large in the sample, particularly for the longer maturities.The approach applied in this study is promising, not only in the sense of potentially providing estimates of market expectations concerning future discrete changes in monetary policy interest rates but also in the sense of its apparent potential in accounting for the often reported poor empirical performance of the expectations hypothesis. Keywords: term structure of interest rates, expectations, target changes, peso problems
  • Schaling, Eric; Eijffinger, Sylvester; Tesfaselassie, Mewael (2004)
    Suomen Pankin keskustelualoitteita 23/2004
    In this paper we incorporate the term structure of interest rates into a standard inflation forecast targeting framework.Learning about the transmission process of monetary policy is introduced by having heterogeneous agents - ie 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.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. Key words: learning, rational expectations, separation principle, Kalman filter, term structure of interest rates JEL classification numbers: C53, E43, E52, F33
  • Rautureau, Nicolas (2004)
    Suomen Pankin keskustelualoitteita 12/2004
    This paper has two objectives.The first is to identify the long-term public perception of monetary policy.The second is to identify the relationship between this perception and long-term bond rates.For German data, the use of a two-factor model of the term structure results in the best forecast of long-term interest rates for the period between January 1975 and January 2003.It also allows us to introduce as the second factor the long-term perception of inflation as a characteristic of the behaviour of monetary authorities.Key words: expectations hypothesis, monetary policy, changepoints JEL classification numbers: E43
  • Ravenna, Federico; Seppälä, Juha (2006)
    Bank of Finland Research Discussion Papers 25/2006
    We study the rejection of the expectations hypothesis within a New Keynesian business cycle model.Earlier research has shown that the Lucas general equilibrium asset pricing model can account for neither sign nor magnitude of average risk premia in forward prices, and is unable to explain rejection of the expectations hypothesis.We show that a New Keynesian model with habitformation preferences and a monetary policy feedback rule produces an upwardsloping average term structure of interest rates, procyclical interest rates, and countercyclical term spreads.In the model, as in U.S. data, inverted term structure predicts recessions.Most importantly, a New Keynesian model is able to account for rejections of the expectations hypothesis.Contrary to earlier work, we identify systematic monetary policy as a key factor behind this result.Rejection of the expectation hypothesis can be entirely explained by the volatility of just two real shocks which affect technology and preferences. Keywords: term structure of interest rates, monetary policy, sticky prices, habit formation, expectations hypothesis JEL classification numbers: E43, E44, E5, G12
  • Ravenna, Federico; Seppälä, Juha (2007)
    Bank of Finland Research Discussion Papers 18/2007
    Within a New Keynesian business cycle model, we study variables that are normally unobservable but are very important for the conduct of monetary policy, namely expected inflation and inflation risk premia. We solve the model using a third-order approximation that allows us to study time-varying risk premia. Our model is consistent with rejection of the expectations hypothesis and the business-cycle behaviour of nominal interest rates in US data. We find that inflation risk premia are very small and display little volatility. Hence, monetary policy authorities can use the difference between nominal and real interest rates from index-linked bonds as a proxy for inflation expectations. Moreover, for short maturities current inflation is a good predictor of inflation risk premia. We also find that short-term real interest rates and expected inflation are significantly negatively correlated and that short-term real interest rates display greater volatility than expected inflation. These results are consistent with empirical studies that use survey data and index-linked bonds to obtain measures of expected inflation and real interest rates. Finally, we show that our economy is consistent with the Mundell-Tobin effect: increases in inflation are associated with higher nominal interest rates, but lower real interest rates. Keywords: term structure of interest rates, monetary policy, expected inflation, inflation risk premia, Mundell-Tobin effect JEL classification numbers: E5, E43, E44, G12
  • Lanne, Markku; Saikkonen, Pentti (2009)
    Bank of Finland Research Discussion Papers 18/2009
    In this paper, we propose a new noncausal vector autoregressive (VAR) model for non-Gaussian time series. The assumption of non-Gaussianity is needed for reasons of identifiability. Assuming that the error distribution belongs to a fairly general class of elliptical distributions, we develop an asymptotic theory of maximum likelihood estimation and statistical inference. We argue that allowing for noncausality is of importance in empirical economic research, which currently uses only conventional causal VAR models. Indeed, if noncausality is incorrectly ignored, the use of a causal VAR model may yield suboptimal forecasts and misleading economic interpretations. This is emphasized in the paper by noting that noncausality is closely related to the notion of nonfundamentalness, under which structural economic shocks cannot be recovered from an estimated causal VAR model. As detecting nonfundamentalness is therefore of great importance, we propose a procedure for discriminating between causality and noncausality that can be seen as a test of nonfundamentalness. The methods are illustrated with applications to fiscal foresight and the term structure of interest rates.
  • Lanne, Markku (1999)
    Suomen Pankin keskustelualoitteita 20/1999
    The expectations hypothesis of the term structure of interest rates is tested using monthly Eurodollar deposit rates for maturities 1, 3 and 6 months covering the period 1983: 1996:6.Whereas classical regression-based tests indicate rejection, tests based on a new model allowing for potential but unrealized regime shifts provide support for the expectations hypothesis.The peso problem is modelled by means of a threshold autoregression.The estimation results suggest that potential regime shift had an effect on expectations concerning the longer-term interest rate only for a short while in the early phase of the sample ??ri?d, when interest rates were at their highest. Key words: peso problem, TAR models, term structure of interest rates
  • Kortela, Tomi; Nelimarkka, Jaakko (2020)
    Bank of Finland Research Discussion Papers 3/2020
    Since the Great Recession, the main evolution in monetary policy has been its attempts to affect the medium and the long-term interest rates with instruments other than the policy rate. Consequently, measuring the stance of monetary policy by a single interest rate becomes problematic. This study explores the macroeconomic effects of conventional and unconventional policy measures in the euro area in a unified framework. We identify simultaneously three monetary policy shocks that influence different parts of the yield curve. These shocks reflect various aspects of actions and communications of the European Central Bank in conventional and unconventional monetary policy periods. According to the results, conventional interest rate policy, forward guidance and quantitative easing have asymmetric output and price responses.
  • Seppälä, Juha; Viertiö, Petri (1996)
    Suomen Pankin keskustelualoitteita 19/1996
    This document reports the currently used term structure estimation method at the Bank of Finland and discusses interpretation of the results it generates.We start by introducing two widely used term structure estimation methods: the Cubic Spline Function method and the Nelson-Siegel approach.We compare their results, paying special attention to the smoothness of forward interest rates and distribution of pricing errors.Next, we introduce the Bank of Finland's method, commenting on its strenghts and weaknesses. Finally, we discuss interpretation of the term structure of interest rates with emphasis on the inflation expectations and the role of the time-varying risk premia. Key words: term structure of interest rates, cubic splines, Nelson-Siegel, forward interest rates, relative value, inflation expectations, time-varying risk premia.
  • Sihvonen, Markus (2021)
    Bank of Finland Research Discussion Papers 15/2021
    I analyze time series momentum along the Treasury term structure. Past bond returns predict future returns both due to autocorrelation in bond risk premia and because unexpected bond return shocks increase the premium. Yield curve momentum is primarily due to autocorrelation in yield changes rather than autocorrelation in bond carry and can largely be captured using a single bond return or yield change factor. Because yield changes are partly induced by changes in the federal funds rate, yield curve momentum is related to post-FOMC announcement drift. The momentum factor is unspanned by the information in the term structure today and is hence inconsistent with standard term structure, macrofinance and behavioral models. I argue that the results are consistent with a model with unpriced longer term dependencies.