TY - JOUR
TI - Euler Equations and Money Market Interest Rates: A Challenge for
Monetary Policy Models
T2 - Journal of Monetary Economics
IS - 7
KW - Euler equation
KW - interest rates
KW - interest rate spreads
KW - monetary policy
AB - Standard macroeconomic models equate the money market rate targeted
by the central bank with the interest rate implied by a consumption
Euler equation. We use U.S. data to calculate the interest rates
implied by Euler equations derived from a number of specifications of
household preferences. Correlations between these Euler equation
rates and the Federal Funds rate are generally negative. Regression
results and impulse response functions imply that the spreads between
the Euler equation rates and the Federal Funds rate are
systematically linked to the stance of monetary policy. Our findings
pose a fundamental challenge for models that equate the two.
AU - Canzoneri, Matthew B.
AU - Cumby, Robert E.
AU - Diba, Behzad T.
UR - http://ecsocman.hse.ru/text/19101755/
PY - 2007
SP - 1863-1881
M2 - 1863
VL - 54
SN -
N1 -
LA - EN
CY -
PB -
M3 -
LB -
VL -
ER -