Research
BPEA | 1984 No. 1Do Long-Term Interest Rates Overreact to Short-Term Interest Rates?
Lawrence H. Summers and
Lawrence H. Summers
Charles W. Eliot University Professor and President Emeritus
- Harvard University
N. Gregory Mankiw
N. Gregory Mankiw
Robert M. Beren Professor of Economics
- Harvard University
Lawrence H. Summers
Charles W. Eliot University Professor and President Emeritus
- Harvard University
N. Gregory Mankiw
Robert M. Beren Professor of Economics
- Harvard University
1984, No. 1
THE TERM STRUCTURE of interest rates has been extensively studied by economists. It is of interest to financial economists because of its close connection with the pricing of bonds of different maturities. More important, understanding the term structure of interest rates is also critical to the evaluation of the effects of alternative macroeconomic policies. For example, it is widely believed that the monetary authority can most directly control short-term interest rates, but that aggregate demand depends primarily on long-term interest rates. If this conviction is correct, the monetary transmission mechanism relies on the behavior of the term structure of interest rates.