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From a macroeconomic perspective, the short-term interest rate is a policy instrument under the direct control of the central bank. From a finance perspective, long rates are risk-adjusted averages of expected future short rates. Thus, as illustrated by much recent research, a joint...
Persistent link: https://www.econbiz.de/10012784960
We estimate a model that summarizes the yield curve using latent factors (specifically, level, slope, and curvature) and also includes observable macroeconomic variables (specifically, real activity, inflation, and the monetary policy instrument). Our goal is to provide a characterization of the...
Persistent link: https://www.econbiz.de/10012762616
We derive the class of arbitrage-free affine dynamic term structure models that approximate the widely-used Nelson-Siegel yield-curve specification. Our theoretical analysis relates this new class of models to the canonical representation of the three-factor arbitrage-free affine model. Our...
Persistent link: https://www.econbiz.de/10012775896
Using a small empirical model of inflation, output, and money estimated on U.S. data, we compare the relative performance of monetary targeting and inflation targeting. The results show that monetary targeting would be quite inefficient, with both higher inflation and output variability. This is...
Persistent link: https://www.econbiz.de/10012778841
We derive the class of arbitrage-free affine dynamic term structure models that approximate the widely-used Nelson-Siegel yield-curve specification. Our theoretical analysis relates this new class of models to the canonical representation of the three-factor arbitrage-free affine model. Our...
Persistent link: https://www.econbiz.de/10012759673
Understanding the dynamic evolution of the yield curve is critical to many financial tasks, including pricing financial assets and their derivatives, managing financial risk, allocating portfolios, structuring fiscal debt, conducting monetary policy, and valuing capital goods. Unfortunately,...
Persistent link: https://www.econbiz.de/10012690148
The downward trend in the amount of Arctic sea ice has a wide range of environmental and economic consequences including important effects on the pace and intensity of global climate change. Based on several decades of satellite data, we provide statistical forecasts of Arctic sea ice extent...
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