The response of term rates to monetary policy uncertainty

Abstract

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The Relationship Between Inflation, Output Growth, and Their Uncertainties: Evidence from Selected CEE Countries

“…Cox et al, 1981;Chan, 1994), then uncertainty shall reduce output growth further by decreasing consumption and investment expenditures through interest rate channel. However, Juster and Wachtel (1972), Dotsey and Sarte (2000) and Jorda and Salyer (2003) argue that uncertainty increases precautionary savings and hence the pool of funds available to finance investment expenditures increases.…”

“…On the other hand, the results suggest that inflation increases output in Bulgaria, although evidence is weak. As Dotsey and Sarte (2000) and Jorda and Salyer (2003) argue, inflation uncertainty may increase precautionary savings and thus reduce interest rates. Therefore, the effects of inflation uncertainty on output may be positive if indirect effects of uncertainty through interest rate channel outweigh direct negative effects.…”

Explaining the US bond yield conundrum

“…Jordá and Salyer (2003) ask whether the liquidity situation helps to explain bond yields (see also ECB, 2005, 23). Durré and Giot (2005) investigate whether stock market variables are responsible for bond market developments.…”

On the Price of German Treasury Bills

“…However, that author does not …nd a relation between the volatility of the FF rate and the risk premia of T-bills returns. On the contrary, Jordà and Salyer (2003) show that the predictions of a limited participation model are con…rmed as higher uncertainty in the FF rate implies lower yields for three-and six-months T-bills. In the same line of research, Nyborg, Rydqvist and Sundaresan (2002) examine how bidders' behaviour is a¤ected by increased uncertainty at the time of bidding in the Swedish treasury auctions.…”