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Interest Rates Under Falling Stars
| Content Provider | Scilit |
|---|---|
| Author | Bauer, Michael D. Rudebusch, Glenn D. |
| Copyright Year | 2017 |
| Description | Journal: Ssrn Electronic Journal Theory predicts that the equilibrium real interest rate, r*, and the perceived trend in inflation, pi*, are key determinants of the term structure of interest rates. However, term structure analyses generally assume that these endpoints are constant. Instead, we show that allowing for time variation in both r* and pi* is crucial for understanding the empirical dynamics of U.S. Treasury yields and risk pricing. Our evidence reveals that accounting for fluctuations in both r* and pi* substantially increases the accuracy of long-range interest rate forecasts, helps predict excess bond returns, improves estimates of the term premium in long-term interest rates, and captures a substantial share of interest rate variability at low frequencies. |
| Related Links | http://www.frbsf.org/economic-research/files/wp2017-16.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3001508 |
| ISSN | 10914358 |
| e-ISSN | 15565068 |
| DOI | 10.2139/ssrn.3001508 |
| Journal | Ssrn Electronic Journal |
| Language | English |
| Publisher | Elsevier BV |
| Publisher Date | 2017-07-10 |
| Access Restriction | Open |
| Subject Keyword | Journal: Ssrn Electronic Journal |
| Content Type | Text |
| Resource Type | Article |
| Subject | Public Health, Environmental and Occupational Health Psychiatry and Mental Health |
