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Fiscal Policy and Interest Rates∗

Published online by Cambridge University Press:  26 March 2020

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Extract

The Treasury Bill rate is regarded as an exogenous policy instrument in the National Institute's forecasting model. Other interest rates in the model are linked to this rate by term-structure equations. This approach, while justifiable for forecasting, has limitations when the model is used for policy simulations since it ignores the responses of interest rates to changes in economic conditions. This note shows how the properties of the model are affected when interest rates are treated as endogenous.

Type
Articles
Information
National Institute Economic Review , Volume 109 , August 1984 , pp. 38 - 44
Copyright
Copyright © 1984 National Institute of Economic and Social Research

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Footnotes

∗

This note was written by Jane Darby of the National Institute. A. J. C. Britton and S. Brooks contributed to the background research.

References

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