Bacchetta, Philippe (contributor); … - 2006
.
Onecanthensolvefortheparametersofthepolynomialsbyimposingthelinearized
bond market equilibrium condition.
ButratherthansolvingforA(L)andB(L) given the model and the process
for interest … rate and supply shocks, we instead choose A(L), b
1
and C(L) (process
of supply shocks) such the that (i) the Foreign bond … predictability has been extensively documented for stock and bond
markets (e.g. see Cochrane, 1999).
11
See for example Kandel and …