NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Term Structure of Interest Rates and Its Role in Monetary Policy for The European Central Bank

Arturo Estrella, Frederic S. Mishkin

NBER Working Paper No. 5279 (Also Reprint No. r2186)
Issued in September 1995
NBER Program(s):   ME

This paper examines the relationship of the term structure of interest rates to monetary policy instruments and to subsequent real activity and inflation in both Europe and the United States. The results show that monetary policy is an important determinant of the term structure spread, but it unlikely to be the only determinant. In addition, there is significant predictive power for both real activity and inflation. The yield curve is thus a simple and accurate measure that should be viewed as one piece of useful information which, along with other information, can be used to help guide European monetary policy.

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Document Object Identifier (DOI): 10.3386/w5279

Published: as "The predictive power of the term structure of interest rates in Europe and the United States: Implications for the European Central Bank", European Economic Review. Volume: 41 Issue: 7 (July 1997) Pages: 1375-1401

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