Working Paper

Monetary policy and the yield curve


Abstract: This paper examines the empirical properties of a two-factor affine model of the term structure of interest rates, estimated with LIBOR and interest rate swap data from 1989 through 2001. Despite its relative simplicity, the model fits the interest rate data remarkably well, both across time and maturity, and identifies changes in the current and expected stance of monetary policy as primary movers of the yield curve.

Keywords: Interest rates; Swaps (Finance);

Access Documents

Authors

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2003

Number: 2003-15