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Monetary Policy and the Term Structure of Interest Rates
[report]
1994
unpublished
This paper addresses a prominent empirical failure of the expectations theory of the temi smicture of interest rates under the assumption of rational expectations. This failure concerns tL magnitude of slope coefficients in regressions of short rate (or long-rate) changes on longshort spreads. It is shown that the anomalous empirical findings can be rationalized with the expectations theory by recognition of an exogenous random (but possibly autoregressive) term premium plus the assumption that
doi:10.3386/w4938
fatcat:iu53clsq5ncx3bgnalehdesnh4