Journal of Economic Perspectives: Vol. 9 No. 3 (Summer 1995)


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Some Lessons from the Yield Curve

Article Citation

Campbell, John Y. 1995. "Some Lessons from the Yield Curve." Journal of Economic Perspectives, 9(3): 129-152.

DOI: 10.1257/jep.9.3.129


This paper reviews the literature on the relation between short- and long-term interest rates. It summarizes the mixed evidence on the expectation hypothesis of the term structure: when long rates are high relative to short rates, short rates tend to rise as implied by the expectations hypothesis, but long rates tend to fall, which is contrary to the expectations hypothesis. The paper discusses the response of the U.S. bond market to shifts in monetary policy in the spring of 1994 and reviews the debate over the optimal maturity structure of the U.S. government debt.

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Campbell, John Y. (Harvard U)

JEL Classifications

E43: Determination of Interest Rates; Term Structure of Interest Rates


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