The Term Structure with Semi-credible Targeting  

Oleh:

Farnsworth, Heber ; Bass, Richard

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 58 no. 2 (Apr. 2003), page 839-865.
Fulltext: p 839.pdf (263.92KB)

Isi artikel

The Federal Reserve sets targets for interest rates which it enforces through direct market intervention.These targets are changed periodically. In this paper, we develop a termstr ucture model in which the short rate is subject to a control which keeps it close to a target which changes from time to time.The probability of target changes is not constant in the model, but changes as a function of observables. The model performs well at explaining the shifts in the yield curve that accompany target changes.

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