We provide evidence on the effect of the slope of the yield curve on economic activity through bank lending. Using detailed data on banks' lending activities coupled with term premium shocks identified using high-frequency event study or instrumental variables, we show that a steeper yield curve...

Long-term yields can be broken down into two components: a risk-neutral rate and a term premium. While the transmission of Quantitative Easing (QE) through the risk-neutral rate is attributed to the well-known signaling effect, changes in the term premium are usually associated to the so-called...

A parsimonious model offers an interpretation of lead-lag cyclical dynamics of the yieldcurve. Low levels of nominal interest rates and inflation, but a steeper yield curve, observedtypically ahead of an expansion reflect news about higher future output growth. If investorsuse bond markets...

This study examines whether Greek sovereign spreads exhibit long memory. The analysis seeks to establish whether long memory effects are present in monthly data of the Greek sovereign spread for the sample Jan. 1999-Dec. 2020. The study performs several long memory tests and concludes that...

Investors care about the probability density of tomorrow's Government bond yields, while the literature on term structure models has focused on monthly or weekly yields. Past literature has long since documented the Garch-type conditional heteroscedasticity of daily yields, but again the...

The following paper addresses the question of whether the risk premium and the risk-free interest rate on the capital market tend to develop in the same or opposite direction or are to be understood as independent of each other. This fundamental consideration is not new, but has gained...

This study investigates the risk associated with the uncertainties in the central bank monetary policy targets in the context of short interest rate models. A class of models is proposed which admits two channels of interest rate risk. In a prototypical case, the short duration channel handles...

In this article we examine the relations between risk, the choice of foreign or local contract terms (parameters) and maturity in the sovereign debt market. Our primary finding is that the maturities of bonds that carry a meaningful degree of risk (rating BBB+ and below, which we label Lower...

This paper deals with the effects of loan maturity mismatching on the shape of the yield curve and on the real economy. For this purpose, it defines the not yet established concept of the natural yield curve based on the Austrian theory of the natural interest rate. It uses a framework of...