Spectral analysis of nominal interest rates

A major issue in macroeconomics concerns the analysis of nominal interest rate movements. Price movements have a substantial effect on nominal interest rates through inflationary expectations. Spectral analysis is used to analyze and interpret interest rate movements. The available empirical evidenc...

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Bibliographic Details
Published in:Journal of economic dynamics & control 1987-06, Vol.11 (2), p.275-281
Main Authors: Erol, Umit, Richardson, James A., Gulledge, Thomas R.
Format: Article
Language:English
Subjects:
Federal Reserve monetary policy
Interest rates
Macroeconomics
Mathematical analysis
Nominal
Online Access:Get full text
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Summary:A major issue in macroeconomics concerns the analysis of nominal interest rate movements. Price movements have a substantial effect on nominal interest rates through inflationary expectations. Spectral analysis is used to analyze and interpret interest rate movements. The available empirical evidence suggests a correlation between price movements and nominal interest rates along the major business cycles, an indication that interest rates can be somewhat sensitive to business cycle movements. The correlation between the money supply and nominal interest rates, on the other hand, appears to be limited to much shorter cycles. The strong correlation at these cycles may be the result of stabilization policies pursued by the Federal Reserve throughout the observation period (1959-1983).
ISSN:0165-1889
1879-1743
DOI:10.1016/0165-1889(87)90020-0