New Keynesian Macroeconomics and the Term Structure

Bekaert, Geert; Cho, Seonghoon; Moreno, Antonio

doi:10.1111/j.1538-4616.2009.00277.x

Cited by 242 publications

(192 citation statements)

References 72 publications

Supporting

Mentioning

174

Contrasting

Unclassified

Order By: Relevance

“…This is consistent with the view that long-term bonds are risky because they are exposed to persistent shifts in inflation (e.g. Bekaert, Cho, and Moreno, 2010).…”

Section: Resultssupporting

confidence: 78%

Asset Pricing in the Frequency Domain: Theory and Empirics

Dew-Becker¹,

Giglio

2016

Rev. Financ. Stud.

135

View full text Add to dashboard Cite

In many a¢ne asset pricing models, the innovation to the pricing kernel is a function of innovations to current and expected future values of an economic state variable, often consumption growth, aggregate market returns, or short-term interest rates. The impulse response of the priced state variable to various shocks has a frequency (Fourier) decomposition, and we show that the price of risk for a given shock can be represented as a weighted integral over that spectral decomposition. In terms of consumption growth, Epstein-Zin preferences imply that the weight of the pricing kernel lies almost entirely at low frequencies, while internal habit-formation models imply that the weight is shifted to high frequencies. We estimate spectral weighting functions for the equity market semi-parametrically and find that they place most of their weight at low frequencies, consistent with Epstein-Zin preferences. For Treasuries, we find that investors view increases in interest rates at low frequencies and decreases at business-cycle frequencies negatively.

show abstract

“…This is consistent with the view that long-term bonds are risky because they are exposed to persistent shifts in inflation (e.g. Bekaert, Cho, and Moreno, 2010).…”

Section: Resultssupporting

confidence: 78%

Asset Pricing in the Frequency Domain: Theory and Empirics

Dew-Becker¹,

Giglio

2016

Rev. Financ. Stud.

135

View full text Add to dashboard Cite

show abstract

“…In the term structure literature, factors determining yield curve dynamics are typically assumed to be stationary I(0) (see Ang and Piazzesi (2003), Gürkaynak, Sack, and Swanson (2005) and Bekaert, Cho, and Moreno (2010), among others). 2 In fact, researchers routinely reject models with unit roots for interest rates because they may imply negative interest rates and explosive interest rate dynamics.…”

mentioning

confidence: 99%

Term Structure Persistence

Abbritti¹,

Gil-Alana²,

Lovcha³

et al. 2015

JOURNAL OF FINANCIAL ECONOMETRICS

Self Cite

View full text Add to dashboard Cite

Stationary I(0) models employed in yield curve analysis typically imply an unrealistically low degree of volatility in long-run short-rate expectations due to fast mean reversion. In this paper we propose a novel multivariate affine term structure model with a two-fold source of persistence in the yield curve: Long-memory and short-memory. Our model, based on an I(d) specification, nests the I(0) and I(1) models as special cases and the I(0) model is decisively rejected by the data. Our model estimates imply both mean reversion in yields and quite volatile long-distance short-rate expectations, due to the higher persistence imparted by the long-memory component. Our implied term premium estimates differ from those of the I(0) model during some relevant periods by more than 4 percentage points and exhibit a realistic countercyclical pattern. Mirko Abbritti AbstractStationary I(0) models employed in yield curve analysis typically imply an unrealistically low degree of volatility in long-run short-rate expectations due to fast mean reversion. In this paper we propose a novel multivariate affine term structure model with a two-fold source of persistence in the yield curve: Long-memory and short-memory. Our model, based on an I(d) specification, nests the I(0) and I(1) models as special cases and the I(0) model is decisively rejected by the data. Our model estimates imply both mean reversion in yields and quite volatile long-distance short-rate expectations, due to the higher persistence imparted by the long-memory component. Our implied term premium estimates differ from those of the I(0) model during some relevant periods by more than 4 percentage points and exhibit a realistic countercyclical pattern.JEL Classification: C3, E4, G1

show abstract

“…Unlike New Keynesian models of the term structure such as Bekaert et al (2010), monetary policy in our model plays no role beyond determining the in°ation rate. Finally, we also explore the relationship between the preference shock that we infer from properties of the yield curve with external habit formation as in Abel (1990), or Campbell and Cochrane (1999), for instance.…”

Section: Introductionmentioning

confidence: 99%

Term Premium Dynamics and the Taylor Rule

et al. 2017

View full text Add to dashboard Cite

We explore the bond-pricing implications of an exchange economy where preference shocks result in time-varying term premiums in real yields with a Taylor rule determining in°ation dynamics and nominal term premiums. We calibrate the model by matching the term structure of the means and volatilities of nominal yields. Unlike a model with exogenous in°ation, a Taylor rule matching empirical properties of in°ation leads to nominal term premiums that are volatile at long maturities.

show abstract

New Keynesian Macroeconomics and the Term Structure

Cited by 242 publications

References 72 publications

Asset Pricing in the Frequency Domain: Theory and Empirics

Asset Pricing in the Frequency Domain: Theory and Empirics

Term Structure Persistence

Term Premium Dynamics and the Taylor Rule

Contact Info

Product

Resources

About