@techreport{NBERw1716,
 title = "Short-Term and Long-Term Interest Rates in a Monetary Model of a Small Open Economy",
 author = "Stephen J. Turnovsky",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "1716",
 year = "1987",
 month = "February",
 URL = "http://www.nber.org/papers/w1716",
 abstract = {This paper analyzes the effects of both anticipated and unanticipated monetary and fiscal disturbances, on the dynamic behavior of a monetary model of a small open economy. It focuses on the adjustment of the short-term and long-term interest rates and the divergence of their transitional paths, particularly in anticipation of these disturbances. The analysis demonstrates how anticipation of a future policy change can generate perverse short-run behavior. The essential reason for the divergence between the short and long rates is that the latter is dominated by long-term expectations, while the former is primarily determined by current influences.},
}