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Author: Stephen J. Turnovsky
Publisher:
ISBN:
Category :
Languages : es
Pages : 20
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Author: Stephen J. Turnovsky
Publisher:
ISBN:
Category :
Languages : es
Pages : 20
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Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Stephen J. Turnovsky
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 52
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Author: Stephen J. Turnovsky
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Mr.Jun Nagayasu
Publisher: International Monetary Fund
ISBN: 1451874723
Category : Business & Economics
Languages : en
Pages : 32
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Book Description
This paper empirically evaluates the validity of the term structure of interest rates in a low-interest-rate environment. Applying a time-series method to high-frequency Japanese data, the term-structure model is found to be useful for economic analysis only when interest rates are high. When interest rates are low, the usefulness of the model declines, since the interest spread contains little information that can be used for predicting future economic activity. The term-structure relationship is also weakened by the Bank of Japan's use of interest rate smoothing.
Author: Ralf Fendel
Publisher: Peter Lang Publishing
ISBN:
Category : Business & Economics
Languages : en
Pages : 216
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Book Description
Interest rate rules play an important role in the empirical analysis of monetary policy as well as in modern monetary theory. Besides giving a comprehensive insight into this line of research the study incorporates the term structure of interest rates into interest rate rules. This is performed analytically as well as empirically. In doing so, state of the art techniques of modern finance for the analysis of the term structure of interest rates are introduced into the macroeconomic concept of interest rate rules. The study implies that from the theoretical perspective term structure effects are an important extension of interest rate rules. From an empirical perspective it shows that including term structure effects in interest rate reaction functions improves our understanding of the interest rate setting of the Deutsche Bundesbank and the European Central Bank.
Author: Fan Dora Xia
Publisher:
ISBN: 9781321085112
Category : Interest rates
Languages : en
Pages : 105
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This dissertation studies the relationship between the term structure of interest rates, monetary policy, and macroeconomy. The first chapter, A Parsimonious No-Arbitrage Term Structure Model that is Useful for Forecasting, offers a solution to a well-known puzzle in the term structure literature. The puzzle is that while the level, slope and curvature (or the first three principal components of yields) can quite accurately summarize the cross-section of yields at any point in time, different functions of interest rates and other macroeconomic variables appear to be helpful when the goal is to predict future interest rates. My paper proposes a parsimonious representation to capture this feature in a large dataset. In the first step, I run reduced rank regressions of one-year excess returns on a panel of 131 macroeconomic variables and initial forward rates from 1964 to 2007. I find that a single linear combination of macroeconomic variables and forward rates can predict excess returns on two- to five-year maturity bonds with R-squared up to 0.71. The forecasting factor subsumes the tent-shaped linear combination of forward rates constructed by Cochrane and Piazzesi (2003) and explains excess returns better. In the second step, I estimate a restricted Gaussian Affine Term Structure Model (GATSM) with the level, slope and curvature commonly used by most term structure models along with the forecasting factor. Restrictions are derived based on the fact that while cross-sectional information in yields is spanned by the level, slope and curvature, cross-sectional information in expected excess returns is spanned by the forecasting factor. Compared with a conventional GATSM only including the level, slope and curvature, the restricted four-factor GATSM generates plausible countercyclical term premia. The second and third chapter focus on the recent zero lower bound (ZLB) period. In the second chapter, Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound, coauthored with Cynthia Wu, we employ an approximation that makes a nonlinear shadow rate term structure model (SRTSM) extremely tractable for analysis of an economy operating near the zero lower bound for interest rates. We show that such a model offers a better description of the data compared to the widely used GATSM. Moreover, the model can be used to summarize the macroeconomic effects of unconventional monetary policy at the ZLB. Using a simple factor-augmented vector autoregression (FAVAR), we show that the shadow rate calculated by our model exhibits similar dynamic correlations with macro variables of interest in the period since 2009 as the fed funds rate did in data prior to the Great Recession. This result gives us a tool for measuring the effects of monetary policy under the ZLB, using either historical estimates based on the fed funds rate or less precisely measured estimates inferred solely from the new data for the shadow rate alone. We show that the Fed has used unconventional policy measures to successfully lower the shadow rate. Our estimates imply that the Fed's efforts to stimulate the economy since 2009 have succeeded in lowering the unemployment rate by 0.13% relative to where it would have been in the absence of these measure. The third chapter, Effects of Unconventional Monetary Policies on the Term Structure of Interest Rates, offers a complete characterization of effects of unconventional monetary policies on interest rates by examining policies' impacts on the whole yield curve. I make use of the SRTSM to summarize all interest rates with factors of lower dimension so that I can capture responses of all interest rates in a parsimonious way. By investigating how policy announcements affect the three factors and then the whole forward curve accordingly, I find that during the ZLB period, forward rate with short maturities are constrained, while forward rates with long maturities still respond to policy announcements. Following each easing (tightening) policy announcement, long forward rates would decrease (increase) by 10 basis points on average.
Author: Rajna Gibson
Publisher: Now Publishers Inc
ISBN: 1601983727
Category : Business & Economics
Languages : en
Pages : 171
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Book Description
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: Mirko Abbritti
Publisher: International Monetary Fund
ISBN: 1475513313
Category : Business & Economics
Languages : en
Pages : 41
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Book Description
This paper introduces global factors within a FAVAR framework in an empirical affine term structure model. We apply our method to a panel of international yield curves and show that global factors account for more than 80 percent of term premia in advanced economies. In particular they tend to explain long-term dynamics in yield curves, as opposed to domestic factors which are instead more relevant to short-run movements. We uncover the key role for global curvature in shaping term premia dynamics. We show that this novel factor precedes global economic and financial instability. In particular, it coincides with immediate expectations of permanent expansionary monetary policy during the recent crisis.
Author: Roland Demmel
Publisher: Springer Science & Business Media
ISBN: 3642585957
Category : Business & Economics
Languages : en
Pages : 284
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Book Description
The introduction of the thesis consists of four parts: first, we motivate our chosen macroeconomic setting by looking at some real world phenomena. For a better understanding of these phenomena, we argue that the mutual dynamic interactions between flScal policy and financial markets need to be closely examined in a macroeconomic framework. Second, we review different strands of the economic literature in order to show that most of the literature has so far exclusively concentrated either on fmancial market dynamics or on flScal policy issues. We conclude that a more integrated model setting is called for in order to explain the dynamic interactions observed in reality. Third, we discuss at length the economic assumptions underlying our model. This avoids multiple repetition later on. Finally, we outline the structure of the thesis and the objectives we pursue in the different chapters. 1. 1 Motivation Fiscal policy and financial market reactions are increasingly receiving world wide attention. The most recent examples are the Maastricht criteria about flScal control, the South-East Asia financial crisis and the resulting IMF policy stance, the high level of public debt in developed and developing countries and the effect on interest rates and economic growth. In contrast to the still underdeveloped theoretical literature on these dynamic links, finding empirical evidence that supports the existence of these links is not a very hard task.
