Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/238678 
Authors: 
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 988
Publisher: 
Levy Economics Institute of Bard College, Annandale-on-Hudson, NY
Abstract: 
There are several widely used benchmark models of the long-term interest rate in quantitative finance. However, these models have yet to incorporate Keynes's valuable insights about interest rate dynamics. The Keynesian approach to interest rate dynamics can be readily incorporated in the benchmark models of the long-term interest rate. This paper modifies several benchmark interest rate models. In these modified models the long-term interest rate is related to the shortterm interest rate and a Wiener process. The Keynesian approach to interest rate dynamics can be useful in addressing theoretical and policy issues.
Subjects: 
Long-Term Interest Rate
Bond Yields
Monetary Policy
Short-Term Interest Rate
John Maynard Keynes
JEL: 
E12
E43
E50
E58
E60
G10
G12
G41
Document Type: 
Working Paper

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