IDEAS home Printed from https://ideas.repec.org/a/taf/recsxx/v22y2019i1p581-601.html
   My bibliography  Save this article

Preferred habitat and the term structure of interest rates in DSGE models

Author

Listed:
  • Celso J. Costa

Abstract

The aim of the present study is to use an alternative approach to derive the term structure of interest rates in DSGE models, which is based on the theory of preferred habitat. We show that this approach yields a substantial term premium which is time-variant. In particular, by introducing bonds of longer maturity, we avoid the underestimation of the volatility of the output. In addition, by allowing longer-term bonds, we show that output is more responsive to technology shocks than it would otherwise. Therefore, the goal of stabilizing output around the nonstochastic level is more difficult to achieve.

Suggested Citation

  • Celso J. Costa, 2019. "Preferred habitat and the term structure of interest rates in DSGE models," Journal of Applied Economics, Taylor & Francis Journals, vol. 22(1), pages 581-601, January.
    • Handle: RePEc:taf:recsxx:v:22:y:2019:i:1:p:581-601
    DOI: 10.1080/15140326.2019.1680124
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/15140326.2019.1680124
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/15140326.2019.1680124?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Costa Junior, Celso J. & Garcia-Cintado, Alejandro C. & Junior, Karlo Marques, 2021. "Macroeconomic policies and the pandemic-driven recession," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 438-465.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:recsxx:v:22:y:2019:i:1:p:581-601. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/recs .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.