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The Predictive Power of the Yield Spread: Further Evidence and A Structural Interpretation

Favero, Carlo A.; Kaminska, Iryna; Söderström, Ulf - C.E.P.R. Discussion Papers - 2005

This paper brings together two strands of the empirical macro literature: the reduced-form evidence that the yield spread helps in forecasting output and the structural evidence on the difficulties of estimating the effect of monetary policy on output in an intertemporal Euler equation. We show...

Persistent link: https://www.econbiz.de/10005791499

Should the Euro Area be Run as a Closed Economy?

Favero, Carlo A.; Giavazzi, Francesco - C.E.P.R. Discussion Papers - 2008

The European Economic and Monetary Union (EMU) has created a new economic area, larger and closer with respect to the rest of the world. Area-specific shocks are thus more important in EMU than country-specific shocks used to be in the previous states, e.g. in Germany. It is thus not surprising...

Persistent link: https://www.econbiz.de/10005136545

Term Structure Forecasting: No-Arbitrage Restrictions vs Large Information Set

Favero, Carlo A.; Niu, Linlin; Sala, Luca - C.E.P.R. Discussion Papers - 2007

This paper addresses the issue of forecasting the term structure. We provide a unified state-space modelling framework that encompasses different existing discrete-time yield curve models. Within such framework we analyze the impact on forecasting performance of two crucial modelling choices,...

Persistent link: https://www.econbiz.de/10005497801

How Does Liquidity Affect Government Bond Yields?

Favero, Carlo A.; Pagano, Marco; von Thadden, Ernst-Ludwig - C.E.P.R. Discussion Papers - 2008

trend in yield differentials, which is correlated with a measure of aggregate risk. In contrast, liquidity differentials … display sizeable heterogeneity and no common factor. We propose a simple model with endogenous liquidity demand, where a bond …'s liquidity premium depends both on its transaction cost and on investment opportunities. The model predicts that yield …

Persistent link: https://www.econbiz.de/10005124174

Contagion in the EMU : the role of Eurobonds with OMTs

Favero, Carlo A.; Missale, Alessandro - In: Review of law and economics : publ. in cooperation with … 12 (2016) 3, pp. 555-584

Persistent link: https://www.econbiz.de/10011596623

Financial Factors, Macroeconomic Information and the Expectations Theory of the Term Structure of Interest Rates

Carriero, Andrea; Favero, Carlo A.; Kaminska, Iryna - C.E.P.R. Discussion Papers - 2004

In this Paper we concentrate on the hypothesis that the empirical rejections of the Expectations Theory (ET) of the term structure of interest rates can be caused by improper modeling of expectations. Our starting point is an interesting anomaly found by Campbell-Shiller (1987), when by taking a...

Persistent link: https://www.econbiz.de/10005791787

Extracting Information from Asset Prices: The Methodology of EMU Calculators

Favero, Carlo A.; Giavazzi, Francesco; Iacone, Fabrizio; … - C.E.P.R. Discussion Papers - 1997

This paper develops a particular technique for extracting market expectations from asset prices. We use the term structure of interest rates to estimate the probability the market attaches to a country, Italy, joining the European Monetary Union at a given date. The extraction of such a...

Persistent link: https://www.econbiz.de/10005792172

Monetary Policy, Forward Rates and Long Rates: Does Germany Differ from the United States?

Favero, Carlo A.; Iacone, Fabrizio; Pifferi, Marco - C.E.P.R. Discussion Papers - 1996

In this paper we analyse the impact of monetary policy shocks on the term structure of interest rates in US and Germany. We estimate the term structure of spot rates and of the instantaneous forward rate following the methodology proposed by Svensson(1994). We interpret the instantaneous forward...

Persistent link: https://www.econbiz.de/10005136777

The Known, the Unknown, and the Unknowable in Financial Risk Management : Measurement and Theory Advancing Practice

Diebold, Francis X. (contributor); … - 2010

A clear understanding of what we know, don't know, and can't know should guide any reasonable approach to managing financial risk, yet the most widely used measure in finance today--Value at Risk, or VaR--reduces these risks to a single number, creating a false sense of security among risk...

Persistent link: https://www.econbiz.de/10014487815

Demographics and the behavior of interest rates

Favero, Carlo A.; Gozluklu, Arie E.; Yang, Haoxi - In: IMF economic review 64 (2016) 4, pp. 732-776

Persistent link: https://www.econbiz.de/10011685635