Macro Factors Monetary Policy Analysis And Affine Term Structure Models
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Macro Factors and the Affine Term Structure of Interest Rates
Author | : Tao Wu |
Publisher | : |
Total Pages | : 50 |
Release | : 2005 |
Genre | : |
ISBN | : |
I formulate an affine term structure model of bond yields from a general equilibrium business-cycle model, with observable macro state variables of the structural economy as the factors. The factor representing monetary policy is strongly mean-reverting, and its influence on the term structure is primarily through changing the slope of the yield curve. The factor representing technology is more persistent, and it affects the term structure by shifting the level of the yield curve. The dynamic implications of the model for the macro economy and the term structure are consistent with the broad empirical patterns. From simulation studies of the macro-factor model I can extract the level and slope factors, similar to the ones extracted from the empirical term structure estimations. Simulation studies also show that the movement of the slope factor is primarily driven by the monetary-policy innovations, and the changes of the level factor is more closely associated with the aggregate-supply shocks from the private sector.
Monetary Policy, Interest Rate Rules, and the Term Structure of Interest Rates
Author | : Ralf Fendel |
Publisher | : Peter Lang Publishing |
Total Pages | : 216 |
Release | : 2007 |
Genre | : Business & Economics |
ISBN | : |
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.
Yield Curve Modeling and Forecasting
Author | : Francis X. Diebold |
Publisher | : Princeton University Press |
Total Pages | : 223 |
Release | : 2013-01-15 |
Genre | : Business & Economics |
ISBN | : 0691146802 |
Understanding the dynamic evolution of the yield curve is critical to many financial tasks, including pricing financial assets and their derivatives, managing financial risk, allocating portfolios, structuring fiscal debt, conducting monetary policy, and valuing capital goods. Unfortunately, most yield curve models tend to be theoretically rigorous but empirically disappointing, or empirically successful but theoretically lacking. In this book, Francis Diebold and Glenn Rudebusch propose two extensions of the classic yield curve model of Nelson and Siegel that are both theoretically rigorous and empirically successful. The first extension is the dynamic Nelson-Siegel model (DNS), while the second takes this dynamic version and makes it arbitrage-free (AFNS). Diebold and Rudebusch show how these two models are just slightly different implementations of a single unified approach to dynamic yield curve modeling and forecasting. They emphasize both descriptive and efficient-markets aspects, they pay special attention to the links between the yield curve and macroeconomic fundamentals, and they show why DNS and AFNS are likely to remain of lasting appeal even as alternative arbitrage-free models are developed. Based on the Econometric and Tinbergen Institutes Lectures, Yield Curve Modeling and Forecasting contains essential tools with enhanced utility for academics, central banks, governments, and industry.
Developments in Macro-Finance Yield Curve Modelling
Author | : Jagjit S. Chadha |
Publisher | : Cambridge University Press |
Total Pages | : 571 |
Release | : 2014-02-06 |
Genre | : Business & Economics |
ISBN | : 1107662559 |
Changes in the shape of the yield curve have traditionally been one of the key macroeconomic indicators of a likely change in economic outlook. However, the recent financial crises have created a challenge to the management of monetary policy, demanding a revision in the way that policymakers model expected changes in the economy. This volume brings together central bank economists and leading academic monetary economists to propose new methods for modelling the behaviour of interest rates. Topics covered include: the analysis and extraction of expectations of future monetary policy and inflation; the analysis of the short-term dynamics of money market interest rates; the reliability of existing models in periods of extreme market volatility and how to adjust them accordingly; and the role of government debt and deficits in affecting sovereign bond yields and spreads. This book will interest financial researchers and practitioners as well as academic and central bank economists.
A Macroeconomic Approach to the Term Premium
Author | : Emanuel Kopp |
Publisher | : International Monetary Fund |
Total Pages | : 22 |
Release | : 2018-06-15 |
Genre | : Business & Economics |
ISBN | : 1484363671 |
In recent years, term premia have been very low and sometimes even negative. Now, with the United States economy growing above potential, inflationary pressures are on the rise. Term premia are very sensitive to the expected future path of growth, inflation, and monetary policy, and an inflation surprise could require monetary policy to tighten faster than anticipated, inducing to a sudden decompression of term and other risk premia, thus tightening financial conditions. This paper proposes a semi-structural dynamic term structure model augmented with macroeconomic factors to include cyclical dynamics with a focus on medium- to long-run forecasts. Our results clearly show that a macroeconomic approach is warranted: While term premium estimates are in line with those from other studies, we provide (i) plausible, stable estimates of expected long-term interest rates and (ii) forecasts of short- and long-term interest rates as well as cyclical macroeconomic variables that are stunningly close to those generated from large-scale macroeconomic models.
Term Structure of Interest Rates
Author | : Zbynek Stork |
Publisher | : LAP Lambert Academic Publishing |
Total Pages | : 124 |
Release | : 2014-07-08 |
Genre | : |
ISBN | : 9783659563881 |
Macro-finance modelling is an increasingly popular topic. Various approaches have been developing rapidly, usually using econometric techniques. This book focuses on structural approach to an analysis of average yield curve and its dynamics using macroeconomic factors. An underlying model is based on basic Dynamic Stochastic General Equilibrium (DSGE) approach. Log-linearized solution of the model is the key for derivation of yield curve and its main determinants - pricing kernel, price of risk and affine term structure of interest rates - based on no-arbitrage assumption. The book presents a consistent derivation of a structural macro-finance model, with a reasonable computational burden that allows for time varying term premia. A simple VAR model, widely used in macro-finance literature, serves as a benchmark. The two models are briefly compared and analysis shows their ability to fit an average yield curve observed from the data. It also presents a possible importance of this issue for monetary and fiscal institutions. The book should help shed some light on the use of DSGE framework within macro-finance modelling and should be useful for students and researchers in this field.
On the Estimation of Term Structure Models and An Application to the United States
Author | : International Monetary Fund |
Publisher | : International Monetary Fund |
Total Pages | : 65 |
Release | : 2010-11-01 |
Genre | : Business & Economics |
ISBN | : 1455298093 |
This paper discusses the estimation of models of the term structure of interest rates. After reviewing the term structure models, specifically the Nelson-Siegel Model and Affine Term- Structure Model, this paper estimates the terms structure of Treasury bond yields for the United States with pre-crisis data. This paper uses a software developed by Fund staff for this purpose. This software makes it possible to estimate the term structure using at least nine models, while opening up the possibility of generating simulated paths of the term structure.
Zero Lower Bound Term Structure Modeling
Author | : L. Krippner |
Publisher | : Springer |
Total Pages | : 436 |
Release | : 2015-01-05 |
Genre | : Business & Economics |
ISBN | : 1137401826 |
Nominal yields on government debt in several countries have fallen very near their zero lower bound (ZLB), causing a liquidity trap and limiting the capacity to stimulate economic growth. This book provides a comprehensive reference to ZLB structure modeling in an applied setting.