The Term Structure of Interest Rates in a DSGE Model with Recursive Preferences

Binsbergen, Jules H. van; Fernández-Villaverde, Jesús; Koijen, Ralph S. J.; Rubio-Ramı́rez, Juan Francisco

doi:10.2139/ssrn.1569916

Cited by 61 publications

(61 citation statements)

References 92 publications

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“…For example, Tallarini (2000) and Piazzesi and Schneider (2006) set ψ at 1, and Bansal and Yaron (2004) set it at 1.5. Chen et al (2013) estimate it to be ≈ 2, and Binsbergen et al (2012) estimate it to be 1.72. Table 3 reports the key moments simulated from the estimation.…”

Section: Bayesian Estimation and Simulation Resultsmentioning

confidence: 98%

Can RBC Models Explain Business Cycles in Korea?

Rhee

2016

Macroecon. Dynam.

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I examine whether an RBC model can generate a higher volatility of consumption relative to output, a strong negative correlation between output and the trade balance, and a weak countercyclicality of the real interest rate, phenomena that have been observed in the business cycles of emerging economies, including Korea. From an RBC model with recursive utility, I show that it is not the degree of relative risk aversion, but the elasticity of intertemporal substitution (EIS), that governs the movements of the variables of the model in the log linearized environment. The Bayesian estimation results based on Korean data from the period 1987 to 2013 suggest that there are some elements of success in describing the Korean economy based on the simple RBC model both with the EIS larger than one and with an error term for the real interest rate equation. An EIS larger than one improves the performance of the simple RBC model mainly in the direction of raising the volatility of consumption relative to output. Simulation results show that the error term for the real interest rate process mostly reflects the endogenous channel of financial frictions where the domestic real interest rate depends negatively on the expected (transitory) productivity shock.

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Section: Bayesian Estimation and Simulation Resultsmentioning

confidence: 98%

Can RBC Models Explain Business Cycles in Korea?

Rhee

2016

Macroecon. Dynam.

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“…Indeed, this is the definition used by van Binsbergen et al (2012). It is also the value implied by Definition 3 of the present paper, which includes the value of leisure in household wealth:…”

Section: Examplesmentioning

confidence: 91%

Risk aversion, risk premia, and the labor margin with generalized recursive preferences

Swanson

2018

Review of Economic Dynamics

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“…3 There are developments incorporating macro factors in financial models of the term structure (Ang and Piazzesi, 2003;Dewachter and Lyrio, 2006;Diebold, Rudebusch, and Aruoba, 2006;Hördahl, Tristani, and Vestin, 2006;Rudebusch and Wu, 2008) and incorporating financial factors in the estimation of macro models (Ang, Piazzesi, and Wei, 2006;van Binsbergen, Fernández-Villaverde, Koijen, and Rubio-Ramírez, 2012).…”

Section: Introductionmentioning

confidence: 99%

Estimating dynamic equilibrium models using mixed frequency macro and financial data

Christensen

Posch

Wel

2016

Journal of Econometrics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We provide a framework for inference in dynamic equilibrium models including financial market data at daily frequency, along with macro series at standard lower frequency. Our formulation of the macro-finance model in continuous-time conveniently accounts for the difference in observation frequency. We suggest the use of martingale estimating functions (MEF) to infer the structural parameters of the model directly through a nonlinear optimization scheme. This method is compared to regression-based methods and the general method of moments (GMM). We illustrate our approaches by estimating the AK-Vasicek model with mean-reverting interest rates. We provide Monte Carlo evidence on the small sample behavior of the estimators and report empirical estimates using 30 years of U.S. macro and financial data. Terms of use: Documents inJEL-Code: C130, E320, O400.

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The Term Structure of Interest Rates in a DSGE Model with Recursive Preferences

Cited by 61 publications

References 92 publications

Can RBC Models Explain Business Cycles in Korea?

Can RBC Models Explain Business Cycles in Korea?

Risk aversion, risk premia, and the labor margin with generalized recursive preferences

Estimating dynamic equilibrium models using mixed frequency macro and financial data

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