Friday, February 5, 2016

The long and short of interest rates

I updated the long and short term interest rate graph from this post with latest data and one- and two-sigma error bands (errors for monthly data, 1960-2016):


...

Update 6 Feb 2016 

Linear scale graph:


4 comments:

  1. May I ask why you are using a logarithmic scale?

    ReplyDelete
    Replies
    1. The main reason is that the short rate would just look like zero, smashed against the axis. On a log scale, you can see the correlation with 1/MB better that I discuss here:

      http://informationtransfereconomics.blogspot.com/2015/08/explicit-implicit-models.html

      And since it is a model of both interest rates:

      log(r) = c log(NGDP/M) - b

      with

      c = 3.02
      b = 11.7

      and M = MB for short rates and M = M0 (MB minus reserves) for long rates, I like to show both on the same graph.

      Delete
    2. But it is easy enough to show both ... I will update.

      Delete

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Also, try to avoid the use of dollar signs as they interfere with my setup of mathjax. I left it set up that way because I think this is funny for an economics blog. You can use € or £ instead.