Download now Free registration required
Nominal yield curves nearly always slope up, implying that investors demand positive risk premia- or term premia-to induce them to hold long-term nominal bonds. Moreover the available evidence strongly suggests that these term premia vary over time, and have shown a secular decline since the early 1980s. Time-variation in term premia complicates the transmission mechanism of monetary policy, as it clouds the relationship between the very short term interest rates that are controlled by central banks and longer-term interest rates that are most relevant for the decisions of households and businesses.
- Format: PDF
- Size: 567.3 KB