MONETARY POLICY AND LONG‐TERM INTEREST RATES: A SURVEY OF EMPIRICAL LITERATURE

Abstract

This paper surveys recent empirical literature on effects of monetary policy on long‐term interest rates. Most studies reviewed here suggest that tightening monetary policy results in higher long‐term interest rates. But available evidence suffers from conceptual and empirical problems and fails to indicate the magnitude of short‐run and long‐run policy effects on long rates. Also, recent studies have not investigated the possibility of shifts in recent‐year effects of monetary policy on long rates. Finally, the paper offers a policy perspective on limitations of existing evidence and suggests future research on monetary policy effects on long rates.

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