A portfolio-balance model of inflation and yield curve determination / by Antonio Diez de los Rios.: FB3-5/2020-6E-PDF
"We propose a portfolio-balance model of the yield curve in which inflation is determined through an interest rate rule that satisfies the Taylor principle. Because arbitrageurs care about their real wealth, they only absorb an increase in the supply of nominal bonds if they are compensated with an increase in their real rates of return. At the same time, because the Taylor principle implies that short-term nominal rates are adjusted more than one for one in response to changes in inflation, the real return on nominal bonds depends positively on inflation. In equilibrium, inflation increases when there is an increase in the supply of nominal bonds to compensate arbitrageurs for the additional supply they have to hold"--Abstract.
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| Department/Agency | Canada. Bank of Canada. |
|---|---|
| Title | A portfolio-balance model of inflation and yield curve determination / by Antonio Diez de los Rios. |
| Series title | Staff working paper = Document de travail du personnel, 1701-9397 ; 2020-6 |
| Publication type | Series - View Master Record |
| Language | [English] |
| Format | Electronic |
| Electronic document | |
| Note(s) | Cover title. Includes bibliographical references (pages 31-32). |
| Publishing information | Ottawa, Ontario, Canada : Bank of Canada = Banque du Canada, 2020. ©2020 |
| Author / Contributor | Diez de los Rios, Antonio. |
| Description | 1 online resource (iii, 43, 4 pages) : charts. |
| Catalogue number |
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| Subject terms | Inflation (Finance) Monetary policy. Inflation. Politique monétaire. |
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