Monetary Policy and the Yield Curve

This paper examines the empirical properties of a two-factor ane model of the term structure of interest rates, estimated with LIBOR and interest rate swap data from 1989 through 2001. Despite its rel-ative simplicity, the model ts the interest rate data remarkably well, both across time and maturity, and identies changes in the current and expected stance of monetary policy as primary movers of the yield curve