SHERP

The Term Structure of Interest Rates and The Real Activity in a Sticky Price Model

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Authors
Jung, Yongseung
Issue Date
2001
Publisher
Seoul Journal of Economics
Citation
Seoul Journal of Economics 14 (No. 1 2001): 31-58
Keywords
leading predictors; monetary policy; sticky price
Abstract
This paper sets up a sticky price model in which money is used to reduce the transaction costs. It shows that the contemporaneous correlations between interest rates and output of the sticky price model match well the data. It also shows that a flexible price model fails to generate interest rates as inverted leading predictors of real economic activity, while a sticky price model partly has a limited success. This paper also shows that the term spread of a sticky price model partly matches the data when there is a modest nominal rigidity.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/1243
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.14(1) (Spring 2001)
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