Examining The Behavior Of Treasury Yields Using A Dynamic Taylor-Type Rule

Abstract

A dynamic version of Taylor’s rule is applied to the analysis of the behavior of short-term and long-term treasury securities. Support for the Fisher effect is found for both maturities while there is evidence that long-term rates are less responsive to the output gap than short-term rates. In addition, long-term rates display a higher speed of adjustment but less persistence than short-term rates.