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Efficient Jacobian evaluations for estimating zero lower bound term structure models

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  • Leo Krippner

Abstract

Faster extended Kalman filter estimations of zero lower bound models of the term structure are possible if the analytic properties of the Jacobian matrix for the measurement equation are exploited. I show that such results are straighforward to incorporate, at least in Monte-Carlo-based implementations, and that will facilitate fast and robust estimations of zero lower bound term structure models with the iterated extended Kalman filter.

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File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2013-12/77_2013_krippner.pdf
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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2013-77.

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Length: 10 pages
Date of creation: Dec 2013
Date of revision:
Handle: RePEc:een:camaaa:2013-77

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Keywords: Black framework; zero lower bound; shadow short rate; term structure model;

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  1. Leo Krippner, 2012. "Modifying Gaussian term structure models when interest rates are near the zero lower bound," Reserve Bank of New Zealand Discussion Paper Series DP2012/02, Reserve Bank of New Zealand.
  2. Leo Krippner, 2013. "Faster solutions for Black zero lower bound term structure models," CAMA Working Papers 2013-66, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  3. Black, Fischer, 1995. " Interest Rates as Options," Journal of Finance, American Finance Association, vol. 50(5), pages 1371-76, December.
  4. Jarrow, Robert A., 2013. "The zero-lower bound on interest rates: Myth or reality?," Finance Research Letters, Elsevier, vol. 10(4), pages 151-156.
  5. Leo Krippner, 2013. "A tractable framework for zero lower bound Gaussian term structure models," Reserve Bank of New Zealand Discussion Paper Series DP2013/02, Reserve Bank of New Zealand.
  6. Leo Krippner, 2012. "Measuring the stance of monetary policy in zero lower bound environments," Reserve Bank of New Zealand Discussion Paper Series DP2012/04, Reserve Bank of New Zealand.
  7. Kim, Don H. & Singleton, Kenneth J., 2012. "Term structure models and the zero bound: An empirical investigation of Japanese yields," Journal of Econometrics, Elsevier, vol. 170(1), pages 32-49.
  8. Michael D. Bauer & Glenn D. Rudebusch, 2013. "Monetary policy expectations at the zero lower bound," Working Paper Series 2013-18, Federal Reserve Bank of San Francisco.
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