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Home > Research and Studies > Bank of Japan Working Paper Series, Review Series, and Research Laboratory Series > Bank of Japan Working Paper Series 2005 > Monetary Policy Uncertainty and Market Interest Rates
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This paper examines the relationship between monetary policy uncertainty and the term structure of interest rates. Extending the Ellingsen and Söderström (2001) model, we demonstrate that long-term interest rates are positively related to monetary policy uncertainty, with the magnitude increasing with maturity. Further, we present empirical evidence to show that the theoretical prediction is generally consistent with US data.
Monetary policy, term structure of interest rates, GARCH.