Changes in uncertainty can affect US long-term rates – ECB paper

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Changes in economic uncertainty may have had a significant effect on long-term interest rates in the US, a working paper published by the European Central Bank says.

In Uncertainty shocks, monetary policy and long-term interest rates, Gianni Amisano and Oreste Tristani present a general equilibrium model, estimated using data from the US. The model gives considerable importance to “uncertainty shocks”, caused by “regime shifts in the conditional variance of productivity shocks”.

In their model

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