TY  - JOUR
AU  - Turnovsky,Stephen J.
TI  - Short-Term and Long-Term Interest Rates in a Monetary Model of a Small Open Economy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1716
PY  - 1987
Y2  - February 1987
UR  - http://www.nber.org/papers/w1716
L1  - http://www.nber.org/papers/w1716.pdf
N1  - Author contact info:
Stephen Turnovsky
Department of Economics
301 Savery Hall; Mail Stop DK 30
University of Washington
Seattle, WA   98195
Tel: 206-545-8028
E-Mail: sturn@u.washington.edu
AB  - 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.
ER  -