The macro risk premium measures the threshold return for real activity that receives funding from savers. We base our argument in this paper on the relationship between the macro risk premium and the growth of financial intermediaries’ balance sheets. The spare capacity of their balance sheets...

We show how to price the time series and cross section of zero coupon bonds via ordinary least squares regressions. Our approach allows computationally fast estimation of term structure models with a large number of pricing factors. Even though we do not impose cross-equation restrictions in the...

We present an affine term structure model for the joint pricing of real and nominal bond yields that accounts for illiquidity. Using the model to adjust breakevens for inflation and liquidity risk substantially improves inflation forecasts. Our estimates imply that the Federal Reserve's...

This paper uses multi-level factor models to characterize within- and between-block variations as well as idiosyncratic noise in large dynamic panels. Block-level shocks are distinguished from genuinely common shocks, and the estimated block-level factors are easy to interpret. The framework...

Yes, they would. In a randomized control trial, we provide groups of respondents from the Bundesbank Online Panel Households with information about a hypothetical alternative ECB monetary policy regime akin to the Federal Reserve's flexible average inflation targeting (AIT). Inflation...