Search results for "Short rate"
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Unconventional monetary policy reaction functions: evidence from the US
2020
Abstract We specify unconventional monetary policy reaction functions for the Fed using linear and nonlinear econometric frameworks. We find that nonstandard policy measures are largely driven by the dynamics of inflation and the output gap, with the effect being particularly strong during QE rounds. Moreover, we uncover the presence of asymmetry and regime dependence in central bank’s actions since the global financial crisis, especially concerning the response of the term spread and the shadow short rate to the growth rate of central bank reserves. From a policy perspective and given the lack of a systematic response of monetary policy to asset price growth in nonstandard times, our findi…
THE CARMA INTEREST RATE MODEL
2014
In this paper, we present a multi-factor continuous-time autoregressive moving-average (CARMA) model for the short and forward interest rates. This model is able to present an adequate statistical description of the short and forward rate dynamics. We show that this is a tractable term structure model and provides closed-form solutions to bond prices, yields, bond option prices, and the term structure of forward rate volatility. We demonstrate the capabilities of our model by calibrating it to a panel of spot rates and the empirical volatility of forward rates simultaneously, making the model consistent with both the spot rate dynamics and forward rate volatility structure.