Work

Do Long-Term Interest Rates Overreact to Short-Term Interest Rates?

Year: 1984

Type: article

Abstract: 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 term rates.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.

Source: Brookings Papers on Economic Activity

DOI: 10.2307/2534279

Authors: N. Gregory Mankiw, Lawrence H. Summers, Laurence Weiss

Institutions: National Bureau of Economic Research, Harvard University

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2118947856

FWCI: 36.84

Cites:

Cited by: 253

Related to: 10