Fluctuation dynamics in US interest rates and the role of monetary policy |
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| Authors: | Daniel O Cajueiro Benjamin M Tabak |
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| Institution: | 1. Department of Economics and National Institute of Science and Technology for Complex Systems, Universidade de Brasília, Brazil;2. Banco Central do Brasil and Department of Economics, Universidade Católica de Brasília, Brazil;1. Faculty of Social Relations, Kyoto Bunkyo University, 80, Senzoku, Makishima-cho, Uji-shi, Kyoto 611-0041, Japan;2. Graduate School of Economics, Osaka University, 1-7 Machikaneyama, Toyonaka, Osaka 560-0043, Japan;1. “Sense and Sense-abilities” Programme, Institute for Infocomm Research, Singapore 138632, Singapore;2. Department of Electrical and Computer Engineering, National University of Singapore, Singapore 117583, Singapore;1. The Cardiac Center, The Children''s Hospital of Philadelphia, Philadelphia, Pennsylvania;2. Division of Infectious Diseases, The Children''s Hospital of Philadelphia, Philadelphia, Pennsylvania;3. Division of Cardiothoracic Surgery, The Children''s Hospital of Philadelphia, Philadelphia, Pennsylvania |
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| Abstract: | This paper presents empirical evidence suggesting that the degree of long-range dependence in interest rates depends on the conduct of monetary policy. We study the term structure of interest rates for the US and find evidence that global Hurst exponents change dramatically according to Chairman Tenure in the Federal Reserve Board and also with changes in the conduct of monetary policy. In the period from 1960s until the monetarist experiment in the beginning of the 1980s interest rates had a significant long-range dependence behavior. However, in the recent period, in the second part of the Volcker tenure and in the Greenspan tenure, interest rates do not present long-range dependence behavior. These empirical findings cast some light on the origins of long-range dependence behavior in financial assets. |
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