This paper analyzes optimal monetary and fiscal policy in a model where money and savings are essential and asset markets matter. The model is able to match some stylized facts about the correlation of real interest rates and stock price-dividend ratios. The results show that fiscal policy can...

On 11 March 2015, SUERF jointly organised a conference with the Oesterreichische Nationalbank and the Austrian Society for Bank Research (Bankwissenschaftliche Gesellschaft - BWG). The present SUERF Study 2015/2 includes a selection of papers based on the authors' contributions to the Vienna...

We study the rejection of the expectations hypothesis within a New Keynesian business cycle model. Earlier research has shown that the Lucas general equilibrium asset pricing model can account for neither sign nor magnitude of average risk premia in forward prices, and is unable to explain...

Although the effects of economic news announcements on asset prices are well established, theserelationships are unlikely to be stable. This paper documents the time variation in the responses of yield curves and exchange rates using high-frequency data from January 2000 through August 2011....

Explanations of why changes in the relative quantities of safe debt seem to affect asset prices often appeal informally to a "portfolio balance" mechanism. I show how this type of effect can be incorporated in a general class of structural, arbitrage-free asset-pricing models using a numerical...

We build a novel macro-finance model that combines a semi-structural macroeconomic module with arbitrage-free yield-curve dynamics. We estimate it for the United States and the euro area using a Bayesian approach and jointly infer the real equilibrium interest rate (r*), trend inflation (π*),...

Two novel models specify interest rates from factors other than time to demonstrate bond market expectations of riskless rates converge to the natural rate of interest.The first yield curve model is based upon risk rather than time. The riskless rate is the incremental yield for an infinitesimal...

The links between real and nominal bond risk premia and macroeconomic dynamics are explored analytically and quantitatively in a model with nominal rigidities and monetary policy. The interest-rate policy rule becomes a restriction linking real and nominal risk premia through endogenous...

Incorporating arbitrage-free term-structure dynamics into a semi-structural macro-model, we jointly estimate the real equilibrium interest rate (r*), trend inflation, and term premia for the United States and the euro area, using a Bayesian approach. The natural real rate and trend inflation are...