On the informational role of term structure in the U.S. monetary policy rule

Serie: Documentos de Trabajo. 0919.

Autor: Jesús Vázquez, Ramón María-Dolores y Juan-Miguel Londoño.

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On the informational role of term structure in the U.S. monetary policy rule (788 KB)

Resumen

The term spread may play a major role in a monetary policy rule whenever data revisions of output and inflation are not well behaved. In this paper we use a structural approach based on the indirect inference principle to estimate a standard version of the New Keynesian Monetary (NKM) model augmented with term structure using both revised and real-time data. The estimation results show that the term spread becomes a significant determinant of the U.S. estimated monetary policy rule when revised and real-time data of output and inflation are both considered.