Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of San Francisco
Working Paper Series
A macro-finance model of the term structure, monetary policy, and the economy
Glenn D. Rudebusch
Tao Wu

This paper develops and estimates a macro-finance model that combines a canonical affine no-arbitrage finance specification of the term structure with standard macroeconomic aggregate relationships for output and inflation. From this new empirical formulation, we obtain several important results: (1) the latent term structure factors from finance no-arbitrage models appear to have important macroeconomic and monetary policy underpinnings, (2) there is no evidence of monetary policy inertia or a slow partial adjustment of the policy interest rate by the Federal Reserve, and (3) both forward-looking and backward-looking elements play important roles in macroeconomic dynamics.

Download Full text
Cite this item
Glenn D. Rudebusch & Tao Wu, A macro-finance model of the term structure, monetary policy, and the economy, Federal Reserve Bank of San Francisco, Working Paper Series 2003-17, 2003.
More from this series
JEL Classification:
Subject headings:
Keywords: Monetary policy ; Econometric models ; Inflation (Finance)
For corrections, contact Noah Pollaczek ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal