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Macro-finance models of interest rates and the economy

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  • Glenn D. Rudebusch

Abstract

During the past decade, much new research has combined elements of finance, monetary economics, and macroeconomics in order to study the relationship between the term structure of interest rates and the economy. In this survey, I describe three different strands of such interdisciplinary macro-finance term structure research. The first adds macroeconomic variables and structure to a canonical arbitrage-free finance representation of the yield curve. The second examines bond pricing and bond risk premiums in a canonical macroeconomic dynamic stochastic general equilibrium model. The third develops a new class of arbitrage-free term structure models that are empirically tractable and well suited to macro-finance investigations.

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Paper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2010-01.

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Date of creation: 2010
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Handle: RePEc:fip:fedfwp:2010-01

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Keywords: Interest rates ; Macroeconomics - Econometric models;

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Cited by:
  1. Kaya, Huseyin, 2013. "The yield curve and the macroeconomy: Evidence from Turkey," Economic Modelling, Elsevier, vol. 32(C), pages 100-107.
  2. Audrino, Francesco & Camponovo, Lorenzo, 2013. "Oracle Properties and Finite Sample Inference of the Adaptive Lasso for Time Series Regression Models," Economics Working Paper Series 1327, University of St. Gallen, School of Economics and Political Science.
  3. António Afonso & Manuel M. F. Martins, 2010. "Level, Slope, Curvature of Sovereign Yield Curve and Fiscal Behaviour," Working Papers Department of Economics 2010/23, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  4. Goda, Thomas & Lysandrou, Photis & Stewart, Chris, 2013. "The contribution of US bond demand to the US bond yield conundrum of 2004–2007: An empirical investigation," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 113-136.
  5. Pietro Catte & Pietro Cova & Patrizio Pagano & Ignazio Visco, 2010. "The role of macroeconomic policies in the global crisis," Questioni di Economia e Finanza (Occasional Papers) 69, Bank of Italy, Economic Research and International Relations Area.
  6. Luís Francisco Aguiar & Manuel M. F. Martins & Maria Joana Soares, 2010. "The yield curve and the macro-economy across time and frequencies," NIPE Working Papers 21/2010, NIPE - Universidade do Minho.
  7. Kozicki, Sharon, 2012. "Macro has progressed," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 23-28.
  8. Afonso, António & Martins, Manuel M.F., 2012. "Level, slope, curvature of the sovereign yield curve, and fiscal behaviour," Journal of Banking & Finance, Elsevier, vol. 36(6), pages 1789-1807.
  9. James D. Hamilton & Jing Cynthia Wu, 2011. "Testable Implications of Affine Term Structure Models," NBER Working Papers 16931, National Bureau of Economic Research, Inc.

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