Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of Kansas City
Research Working Paper
Term premia : endogenous constraints on monetary policy
Sharon Kozicki
Peter A. Tinsley

Monetary policy evaluation using structural macro models suggests that historical monetary policy responds less aggressively to inflation and the output gap than would an optimal policy rule. However, these results are obtained using models with constant term premia. This paper shows how term premia may depend on the policy rule specification and policy rate uncertainty. A more aggressive policy rule involves an economically important increase in term premia. Consequently, conclusions about the specification of optimal monetary policy rules based on counterfactual simulations of models that exclude term premia effects may not be valid.

Download Full text
Cite this item
Sharon Kozicki & Peter A. Tinsley, Term premia : endogenous constraints on monetary policy, Federal Reserve Bank of Kansas City, Research Working Paper RWP 02-07, 2002.
More from this series
JEL Classification:
Subject headings:
Keywords: Monetary policy
For corrections, contact Lu Dayrit ()
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