Economic Quarterly

1999

 

Fall 1999

Explaining the Increased Variability in Long-Term Interest Rates

Mark W. Watson

The variability of changes in long-term interest rates increased dramatically in the 1980s and 1990s. Can such increased variability be accounted for by changes in the behavior of short-term interest rates? While changes in short-term interest rates have become less variable, they have become more persistent. This latter development can explain the increased variability in long-term rates.

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