Do Long-Term Interest Rates Overreact to Short-Term Interest Rates? / N. Gregory Mankiw, Lawrence H. Summers.

Format:

Book

Author/Creator:

Mankiw, N. Gregory.

Contributor:

National Bureau of Economic Research.

Summers, Lawrence H.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1345.

NBER working paper series no. w1345

Language:

English

Subjects (All):

Interest rates.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1984.

Cambridge, Massachusetts : National Bureau of Economic Research, 1984.

Summary:

This paper examines the hypothesis that financial markets are myopic by studying the term structure of interest rates. White rejecting decisively the traditional expectations hypothesis regarding the term structure, our statistical results also lead us to conclude that long term interest rates do not overreact to either the level or the change in short termrates. This finding suggests that participants in bond markets are not myopic or overly sensitive to recent events. Our statistical results also suggest that most variations in the yield curve reflect changes in liquidity premia rather than expected changes in interest rates.

Notes:

Print version record

May 1984.