shape of yield curves during fiscal/monetary tightening/loosening.

CFA Level III
#1

Does anyone have a good way of remembering the shape of yield curves during fiscal/monetary tightening/loosening?

Or what is the intuition here?

thanks!

#2

Yups in case of opposite sitations remeber that moentary is more powerful

So when monetary loose and fiscal tight - Then slope is slighly upward …

Let me know in case i am wrong

#3

Upward sloping but not steep…

• Upward-sloping yield curve: Expected economic growth

• Downward-sloping yield curve: Economic downturn expected

Fiscal Policy

Monetary Policy

Yield Curve Shape

Expansive

Expansive

Sharply upward

Tight

Tight

Downward sloping; recession is expected

Tight

Expansive

Upward sloping, but not as steep (monetary trumps)

Expansive

Tight

Flat (monetary trumps)

#4

Monetary (loosening) policy can manipulate interest rate to nagative. Tightening fiscal policy do not have that much power. Monetary control short-term rate. => Yield curve moderately steep

#5

i think i got this. There is a good matrix on page 66 of vol.3. I can memorise that.