Monetary policy and the fisher effect

Historical estimates of the informational content in the yield curve may no t be relevant after a change in monetary policy. This study uses a small dy namic rational expectations model with staggered price setting to study how monetary policy affects the relation between nominal interest rates, infla tion expectations, and real interest rates. The benchmark parameters, inclu ding the Fed's loss function parameters, are estimated by maximum likelihoo d on quarterly US data. The policy experiments include stronger inflation t argeting and more active monetary policy. (C) 2001 Society for Policy Model ing. Published by Elsevier Science Inc.