The Term Structure Of Interest Rates In A Dsge Model With Recursive Preferences PDF Download
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| 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 | : Sergey Isaenko |
| Publisher | : |
| Total Pages | : 33 |
| Release | : 2010 |
| Genre | : |
| ISBN | : |
Download The Term Structure of Interest Rate in an Economy Where Investors Have Heterogeneous Recursive Preferences Book in PDF, ePub and Kindle
This paper presents an equilibrium model of the term structure of interest rates when investors have heterogeneous recursive preferences. We consider a pure exchange economy with two classes of investors who have different relative risk aversions and different elasticities of intertemporal substitution. The RRA and the EIS can be varied independently for each investor. We use the model to examine the effects that the heterogeneity in preferences of investors has on their portfolio-consumption choices as well as on the instantaneous interest rate and bond yield. We find that the heterogeneity only in the RRA affects the cross-sectional as well as intertemporal variations of the consumption rate, the portfolio allocations for each investor and the instantaneous interest rate. However, the heterogeneity only in the EIS matters only for the intertemporal variations of these processes.
| 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 | : 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 | : Olesya V. Grishchenko |
| Publisher | : |
| Total Pages | : 65 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
Download Term Structure of Interest Rates with Short-Run and Long-Run Risks Book in PDF, ePub and Kindle
Bond returns are time-varying and predictable. What economic forces drive this variation? To answer this long-standing question, we propose a consumption-based model with recursive preferences, long-run risks, and inflation non-neutrality. Our model offers two important insights. First, our model matches well the post-1990 nominal upward-sloping U.S. Treasury yield curve. Second, consistent with our model's implication, variance risk premium based on the U.S. interest rate derivatives data emerges as a strong predictor for short-horizon Treasury excess returns, above and beyond the predictive power of other popular factors. In the model equilibrium, the variance risk premium is related to the short-run risks in the economy, while standard forward-rate-based factors are associated with long-run risks in the economy.
| Author | : Hiroatsu Tanaka |
| Publisher | : |
| Total Pages | : 84 |
| Release | : 2011 |
| Genre | : |
| ISBN | : 9781124718262 |
Download Monetary Policy Regimes and the Term Structure of Interest Rates with Recursive Utility Book in PDF, ePub and Kindle
The estimation of the model suggests that the assumption of a discretion regime performs better than a commitment regime in terms of quantitatively fitting some salient features of the US data on the term structure and the business cycle during the Volcker-Greenspan-Bernanke era. The lack of policy credibility leads to volatile and persistent inflation, which generates volatile expected long-run inflation that is negatively correlated with future continuation values. This is perceived particularly risky by EZ nominal bond holders and results in upward sloping average nominal yields, long-term yield volatility and excess return predictability closer to the magnitude observed in the data while keeping the unconditional volatilities of consumption growth and inflation realistic.
| 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 | : Jiang Wang |
| Publisher | : |
| Total Pages | : 36 |
| Release | : 1995 |
| Genre | : Bonds |
| ISBN | : |
Download The Term Structure of Interest Rates in a Pure Exchange Economy with Heterogeneous Investors Book in PDF, ePub and Kindle
This paper presents an equilibrium model of the term structure of interest rates when investors have heterogeneous preferences. The basic model considers a pure exchange economy of two classes of investors with different (but constant) relative risk-aversion and gives closed-form solutions to bond prices. We use the model to examine the effect of preference heterogeneity on the behavior of bond yields. Extensions to cases of more than two investors are also considered
| Author | : Kenneth B. Dunn |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 1984 |
| Genre | : |
| ISBN | : |
Download Modeling the Term Structure of Interest Rates Under Nonseparable Utilityand Duriability of Goods Book in PDF, ePub and Kindle
This paper investigates the term structure relations implied by a two-good model in which goods are durable and the preference function of consimters may be non separable both over time and the decision variables. The parameters characterizing preferences are estimated and the implied restrictions on the comovements of consumptions and the returns from following different investment strategies in bonds are examined. Both the durability of goods (modeled by a linear service technology) and the nonseparability of preferences over services from goods are important factors in explaining the time paths of individual returns. However, substantial evidence against our model is obtained when the restrictions associated with two different investment strategies are studied simultaneously. Specifically, the difference between the sample mean returns are too large relative to the difference between the sample covariances of the returns and the marginal utility from acquiring a unit of the numeraire good. Our findings suggest that these discrepancies are not a consequence of either the relatively small variability in aggregate acquisitions of goods, or our small estimates of relative risk aversion.
