The Influence of Fiscal and Monetary Policies on the Shape of the Yield Curve

Vol: 
65/2023
Author name: 
Chang Y
Gómez-Rodríguez F
Matthes C
Year: 
2023
Month: 
December
Abstract: 

We investigate the influence of the U.S. government’s spending and taxation decisions, along with the monetary policy choices made by the Federal Reserve, on the dynamics of the nominal yield curve. Aggregate government spending moves the long end of the yield curve, whereas monetary policy and changes in taxation move the short end of the yield curve on impact. Disentangling different types of government spending, we find that only government consumption exerts a discernible influence on the short end of the yield curve. The effects are generally transient and disappear after one year.

Updated:  22 April 2024/Responsible Officer:  Crawford Engagement/Page Contact:  CAMA admin