Monetary Policy and Interest Rate Spreads


This paper investigates the effects of monetary policy shocks and uncertainty about monetary policy on key macroeconomic variables and interest rate spreads — the term spread and credit spread. We use monthly data for the United States and a multivariate structural GARCH-in-Mean VAR model to estimate the effects on the growth rate of real output, the inflation rate, term spread, credit spread, and the policy rate. We find statistically significant effects on all economic and financial variables.

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Correspondence to Apostolos Serletis.

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We would like to thank the Editor, George Tavlas, and an anonymous referee for comments that greatly improved the paper.

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Nsafoah, D., Serletis, A. Monetary Policy and Interest Rate Spreads. Open Econ Rev 31, 707–727 (2020).

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  • Monetary policy uncertainty
  • GARCH-in-Mean VAR
  • Interest rate spreads

JEL Classification

  • E43
  • E44
  • E52
  • E58