We study the effect of different types of macroeconomic impulses on the nominal yield curve. We employ two distinct approaches to identifying economic shocks in VARs. Our first approach uses a structural VAR due to Galí (1992). Our second strategy identifies fundamental impulses from...

Exogenous shocks to monetary policy strongly affect short-term interest rates, but have little or no effect on longer-term interest rates.

We study market illiquidity in an economy subject to non-fundamental shocks. Asset trading occurs via decentralized one-on-one bargaining. The model has multiple rational expectations equilibria; we associate certain Pareto inferior equilibria with liquidity crises. The government can improve...