The Term Structure Of Interest Rates In A Dsge Model PDF Download
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Author | : Marina Emiris |
Publisher | : |
Total Pages | : 63 |
Release | : 2008 |
Genre | : |
ISBN | : |
Download The Term Structure of Interest Rates in a DSGE Model Book in PDF, ePub and Kindle
The paper evaluates the implications of the Smets and Wouters (2004) DSGE model for the US yield curve. Bond prices are modelled in a way that is consistent with the macro model and the resulting risk premium in long term bonds is a function of the macro model parameters exclusively. When the model is estimated under the restriction that the implied average 10-year term premium matches the observed premium, it turns out that risk aversion and habit only need to rise slightly while the increase in the term premium is achieved by a drop in the monetary policy parameter that governs the aggressiveness of the monetary policy rule. A less aggressive policy increases the persistence of the reaction of inflation and the short interest rate to any shock, reinforces the covariance between the marginal rate of substitution of consumption and bond prices, turns positive the contribution of the inflation premium and drives the term premium up. The paper concludes that the presence of nominal rigidities by generating persistent inflation can help in reconciling the macro model with the yield curve data.
Author | : Jules H. van Binsbergen |
Publisher | : |
Total Pages | : 49 |
Release | : 2010 |
Genre | : Economics |
ISBN | : |
Download The term structure of interest rates in a DSGE model with recursive preferences Book in PDF, ePub and Kindle
We solve a dynamic stochastic general equilibrium (DSGE) model in which the representative household has Epstein and Zin recursive preferences. The parameters governing preferences and technology are estimated by means of maximum likelihood using macroeconomic data and asset prices, with a particular focus on the term structure of interest rates. We estimate a large risk aversion, an elasticity of intertemporal substitution higher than one, and substantial adjustment costs. Furthermore, we identify the tensions within the model by estimating it on subsets of these data. We conclude by pointing out potential extensions that might improve the model's fit.
Author | : Jesús Fernández-Villaverde |
Publisher | : |
Total Pages | : 49 |
Release | : 2010 |
Genre | : Equilibrium (Economics) |
ISBN | : |
Download The Term Structure of Interest Rates in a DSGE Model with Recursive Preferences Book in PDF, ePub and Kindle
We solve a dynamic stochastic general equilibrium (DSGE) model in which the representative household has Epstein and Zin recursive preferences. The parameters governing preferences and technology are estimated by means of maximum likelihood using macroeconomic data and asset prices, with a particular focus on the term structure of interest rates. We estimate a large risk aversion, an elasticity of intertemporal substitution higher than one, and substantial adjustment costs. Furthermore, we identify the tensions within the model by estimating it on subsets of these data. We conclude by pointing out potential extensions that might improve the model's fit.
Author | : Rajna Gibson |
Publisher | : Now Publishers Inc |
Total Pages | : 171 |
Release | : 2010 |
Genre | : Business & Economics |
ISBN | : 1601983727 |
Download Modeling the Term Structure of Interest Rates Book in PDF, ePub and Kindle
Modeling the Term Structure of Interest Rates provides a comprehensive review of the continuous-time modeling techniques of the term structure applicable to value and hedge default-free bonds and other interest rate derivatives.
Author | : Aleš Maršál |
Publisher | : |
Total Pages | : |
Release | : 2011 |
Genre | : |
ISBN | : |
Download The Term Structure of Interest Rates in Small Open Economy DSGE Model Book in PDF, ePub and Kindle
Author | : |
Publisher | : |
Total Pages | : |
Release | : 2016 |
Genre | : |
ISBN | : |
Download Fiscal Policy and the Term Structure of Interest Rates in a DSGE Model Book in PDF, ePub and Kindle
We examine the role of government spending in the dynamics of the term structure of interest rates. Is the quantity of risk related government spending important for the price of risk? How does it depend on monetary policy conduct? Can fiscal policy immunize its impact on the term structure of interest rates? To answer this questions, we explore asset pricing implications of fiscal policy in what become paradigm in dynamic general equilibrium macro-finance literature. We break down the transmission of the government spending to macroeconomic attributes driving the dynamic response of the yield curve, both analytically and numerically. The novelty of our approach lies in the way we quantify the decomposition of pricing kernel. We find that rise in fiscal uncertainty amplifies the hedging property of bonds against real and nominal risks. Depending on the size of uncertainty monetary policy drives up the price of nominal risk. Spending reversals break the link between quantity and price of fiscal risk.
Author | : Pablo Aguilar |
Publisher | : |
Total Pages | : 55 |
Release | : 2018 |
Genre | : |
ISBN | : |
Download Term Structure and Real-Time Learning Book in PDF, ePub and Kindle
This paper introduces the term structure of interest rates into a medium-scale DSGE model. This extension results in a multi-period forecasting model that is estimated under both adaptive learning and rational expectations. Term structure information enables us to characterize agents' expectations in real time, which addresses an imperfect information issue mostly neglected in the adaptive learning literature. Relative to the rational expectations version, our estimated DSGE model under adaptive learning largely improves the model fit to the data, which include not just macroeconomic data but also the yield curve and the consumption growth and inflation forecasts reported in the Survey of Professional Forecasters. Moreover, the estimation results show that most endogenous sources of aggregate persistence are dramatically undercut when adaptive learning based on multi-period forecasting is incorporated through the term structure of interest rates.
Author | : Haitao Li |
Publisher | : |
Total Pages | : 49 |
Release | : 2019 |
Genre | : |
ISBN | : |
Download Optimal Monetary Policy and Term Structure in a Continuous-Time DSGE Model Book in PDF, ePub and Kindle
We study optimal monetary policy, macro dynamics and their implications on the term structure of interest rates in a continuous-time New-Keynesian model. With a quadratic cost function and regime-dependent monetary discount rates, the time-consistent optimal monetary policy is regime-dependent linear interest rate rules in inflation and output gaps. This optimal interest rate rule converges to zero if monetary authority extremely concerns immediate macro stability. The optimal interest rate rules and the equilibrium dynamics of inflation and output gap form a regime-dependent term structure model. We take the model to the US data and find that the Fed had followed two distinct interest rate rules during 1952-2007, the near-optimal one is more stabilizing than the non-optimal one.
Author | : Marcelo Ferman |
Publisher | : |
Total Pages | : |
Release | : 2011 |
Genre | : |
ISBN | : |
Download A Macro-finance Approach to the Term Structure of Interest Rates Book in PDF, ePub and Kindle
This thesis contributes to the literature that analyses the term structure of interest rates from a macroeconomic perspective. Chapter 1 studies the transmission of monetary policy shocks to the US macroeconomy and term structure. Based on estimates of a Macro-Affine model, it shows that monetary policy shocks trigger relevant movements in bond premia, which in turn feed back into the macroeconomy. This channel of monetary transmission shows up importantly in the pre-Volcker period, but becomes irrelevant later. This chapter concludes with an analysis of the macroeconomic implications of shocks to expectations about future monetary policy actions. Chapter 2 proposes a regime-switching approach to explain why the U.S. nominal yield curve on average has been steeper since the mid-1980s than during the Great Inflation of the 1970s. It shows that, once the possibility of regime switches in the short-rate process is incorporated into investors' beliefs, the average slope of the yield curve generally will contain a new component called 'level risk'. Level risk estimates were found to be large and negative during the Great Inflation, but became moderate and positive afterwards. These findings are replicated in a Markov-Switching DSGE model, where the monetary policy rule shifts between an active and a passive regime with respect to inflation fluctuations. Chapter 3 develops a DSGE model in which banks use short-term deposits to provide firms with long-term credit. The demand for long-term credit arises because firms borrow in order to finance their capital stock which they only adjust at infrequent intervals. The model shows that maturity transformation in the banking sector in general attenuates the output response to a technological shock. Implications of long-term nominal contracts are also examined in a New Keynesian version of the model. In this case, maturity transformation reduces the real effects of a monetary policy shock.
Author | : R. S. Masera |
Publisher | : |
Total Pages | : 232 |
Release | : 1972 |
Genre | : Business & Economics |
ISBN | : |
Download The Term Structure of Interest Rates Book in PDF, ePub and Kindle