A working paper exploring the idea that information equilibrium is a general principle for understanding economics. [Here] is an overview.

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):

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:

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.

May I ask why you are using a logarithmic scale?

ReplyDeleteThe 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:

Deletehttp://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.

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

DeleteAh. I see.

Delete