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  • Lee, Sang-Sub


This paper investigates the macroeconomic sources of time-varying risk premia in the term structure of interest rates from 1959 to 1988 based on an intertemporal cash-in-advance model of the term structure. While the conditional variance measures of output and monetary uncertainty show significant explanatory power for the risk premia, the cross-equation restrictions implied by the model are not supported by the data. The study also finds evidence of sources of risk premia ignored by the model. Incorporating possible effects of omitted factors improves the model's ability to explain the cross-sectional behavior and the variability of the risk premia significantly. Copyright 1995 by Ohio State University Press.

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  • Lee, Sang-Sub, 1995. "Macroeconomic," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 549-569, May.
  • Handle: RePEc:mcb:jmoncb:v:27:y:1995:i:2:p:549-69

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    References listed on IDEAS

    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
    2. Canzoneri, Matthew B, 1985. "Monetary Policy Games and the Role of Private Information," American Economic Review, American Economic Association, vol. 75(5), pages 1056-1070, December.
    3. Fratianni, Michele & von Hagen, Jurgen & Waller, Christopher J, 1997. "Central Banking as a Political Principal-Agent Problem," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 378-393, April.
    4. Duca, John V, 1987. "The Spillover Effects of Nominal Wage Rigidity in a Multisector Economy: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(1), pages 117-121, February.
    5. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-167, March.
    6. Waller, Christopher J, 1992. "The Choice of a Conservative Central Banker in a Multisector Economy," American Economic Review, American Economic Association, vol. 82(4), pages 1006-1012, September.
    7. Andreas Fischer, 1993. "Inflation Targeting: The New Zealand and Canadian Cases," Cato Journal, Cato Journal, Cato Institute, vol. 13(1), pages 1-27, Spring/Su.
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