APPLICATION • The Tenn Structure ol

APPLICATION • The Tenn Structure ol Interest Rat es
Let's now apply Lucass argument to a concrete example involving only one equation
typically found in econometric models: the term structure equation. The equation
relates the long-term interest rate to current and past values of the short-term interest
rate. It is one of the most important equations in macroeconometric models because
the long-term interest rate, not the short-term rate, is the one believed to have the
larger impact on aggregate demand.
In Chapter 6, we learned that the long-term interest rate is related to an average
of expected future short-term interest rates. Suppose that in the past, when the shortterm
rate rose, it quickly fell back down again; that is, any increase was temporary.
Because rational expectations theory suggests that any rise in the short-term interest
rate is expected to be only temporary, a rise should have only a minimal effect on the
average of expected future short-term rates. It will cause the long-term interest rate
to rise by a negligible amount. The term structure relationship estimated using past
data will then show only a weak effect on the long-term interest rate of changes in
the short-term rate.
Suppose the Fed wants to evaluate what will happen to the economy if it pursues
a policy that is likely to raise the short-term interest rate from a current level of 3% to
a permanently higher level of 5% . The term structure equation that has been estimated
using past data will indicate that just a small change in the long-term interest rate will
occur. However, if the public recognizes that the short-term rate is rising to a permanently
higher level, rational expectations theory indicates that people will no longer

Kết quả (Việt) 1:

APPLICATION • The Tenn Structure ol Interest Rat esLet's now apply Lucass argument to a concrete example involving only one equationtypically found in econometric models: the term structure equation. The equationrelates the long-term interest rate to current and past values of the short-term interestrate. It is one of the most important equations in macroeconometric models becausethe long-term interest rate, not the short-term rate, is the one believed to have thelarger impact on aggregate demand.In Chapter 6, we learned that the long-term interest rate is related to an averageof expected future short-term interest rates. Suppose that in the past, when the shorttermrate rose, it quickly fell back down again; that is, any increase was temporary.Because rational expectations theory suggests that any rise in the short-term interestrate is expected to be only temporary, a rise should have only a minimal effect on theaverage of expected future short-term rates. It will cause the long-term interest rateto rise by a negligible amount. The term structure relationship estimated using pastdata will then show only a weak effect on the long-term interest rate of changes inthe short-term rate.Suppose the Fed wants to evaluate what will happen to the economy if it pursuesa policy that is likely to raise the short-term interest rate from a current level of 3% toa permanently higher level of 5% . The term structure equation that has been estimatedsử dụng quá khứ dữ liệu sẽ cho biết rằng chỉ là một thay đổi nhỏ trong tỷ lệ lãi suất lâu dài sẽxảy ra. Tuy nhiên, nếu công chúng nhận ra rằng ngắn hạn tỷ lệ ngày càng tăng cho một vĩnh viễnmức độ cao hơn, kỳ vọng hợp lý thuyết cho thấy rằng mọi người sẽ không còn