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The Macroeconomic Determinants of the US Term-Structure during the Great Moderation

  • Alessia Paccagnini

The aim of this paper is to study how the macroeconomic impulses can affect the term structure during the Great Moderation. As novelty in the research strategy, we create a term-structure using three latent factors of the yield curve. A Nelson-Siegel Model is implemented to estimate the latent factors which correspond to the level, the slope, and the curvature of the yield curve. As policy implication, the interpolated term structure suggests us how all the macro shocks impact on the overall yield curve, even if the impact has a different magnitude across maturities.

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File URL: http://dems.unimib.it/repec/pdf/mibwpaper274.pdf
File Function: First version, 2014
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Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 274.

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Length: 27
Date of creation: Jun 2014
Date of revision: Jun 2014
Handle: RePEc:mib:wpaper:274
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  1. Jens H. E. Christensen & Francis X. Diebold & Glenn D. Rudebusch, 2008. "An arbitrage-free generalized Nelson-Siegel term structure model," Working Paper Series 2008-07, Federal Reserve Bank of San Francisco.
  2. Jens H. E. Christensen & Francis X. Diebold & Glenn D. Rudebusch, 2007. "The Affine Arbitrage-Free Class of: Nelson-Siegel Term Structure Models," NBER Working Papers 13611, National Bureau of Economic Research, Inc.
  3. Mumtaz, Haroon & Surico, Paolo, 2008. "Time-Varying Yield Curve Dynamics and Monetary Policy," Discussion Papers 23, Monetary Policy Committee Unit, Bank of England.
  4. International Monetary Fund, 2010. "On the Estimation of Term Structure Models and An Application to the United States," IMF Working Papers 10/258, International Monetary Fund.
  5. Lemke, Wolfgang, 2008. "An affine macro-finance term structure model for the euro area," The North American Journal of Economics and Finance, Elsevier, vol. 19(1), pages 41-69, March.
  6. Francis X. Diebold & Canlin Li, 2003. "Forecasting the Term Structure of Government Bond Yields," NBER Working Papers 10048, National Bureau of Economic Research, Inc.
  7. Peter Hordahl & Oreste Tristani & David Vestin, 2004. "A joint econometric model of macroeconomic and term structure dynamics," Money Macro and Finance (MMF) Research Group Conference 2003 48, Money Macro and Finance Research Group.
  8. Reinhart, Carmen M. & Rogoff, Kenneth, 2009. "The Aftermath of Financial Crises," CEPR Discussion Papers 7209, C.E.P.R. Discussion Papers.
  9. Francis X. Diebold & Glenn D. Rudebusch & S. Boragan Aruoba, 2004. "The Macroeconomy and the Yield Curve: A Dynamic Latent Factor Approach," NBER Working Papers 10616, National Bureau of Economic Research, Inc.
  10. Qiang Dai & Kenneth J. Singleton, 1998. "Specification Analysis of Affine Term Structure Models," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-083, New York University, Leonard N. Stern School of Business-.
  11. James H. Stock & Mark W. Watson, 2003. "Has the Business Cycle Changed and Why?," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230 National Bureau of Economic Research, Inc.
  12. Afonso, António & Martins, Manuel M.F., 2010. "Level, slope, curvature of the sovereign yield curve, and fiscal behaviour," Working Paper Series 1276, European Central Bank.
  13. Marco Rodriguez Waldo & Carlos I. Medeiros, 2011. "The Dynamics of the Term Structure of Interest Rates in the United States in Light of the Financial Crisis of 2007–10," IMF Working Papers 11/84, International Monetary Fund.
  14. Bianchi, Francesco & Mumtaz, Haroon & Surico, Paolo, 2009. "The great moderation of the term structure of UK interest rates," Journal of Monetary Economics, Elsevier, vol. 56(6), pages 856-871, September.
  15. Fama, Eugene F & Bliss, Robert R, 1987. "The Information in Long-Maturity Forward Rates," American Economic Review, American Economic Association, vol. 77(4), pages 680-92, September.
  16. Contessi, Silvio & De Pace, Pierangelo & Guidolin, Massimo, 2014. "How did the financial crisis alter the correlations of U.S. yield spreads?," Journal of Empirical Finance, Elsevier, vol. 28(C), pages 362-385.
  17. Charles R. Nelson & Andrew F. Siegel, 1986. "Long-Term Behavior of Yield Curves," NBER Working Papers 1789, National Bureau of Economic Research, Inc.
  18. Aguiar-Conraria, Luís & Martins, Manuel M.F. & Soares, Maria Joana, 2012. "The yield curve and the macro-economy across time and frequencies," Journal of Economic Dynamics and Control, Elsevier, vol. 36(12), pages 1950-1970.
  19. Diebold, Francis X. & Piazzesi, Monica & Rudebusch, Glenn D., 2005. "Modeling bond yields in finance and macroeconomics," CFS Working Paper Series 2005/03, Center for Financial Studies (CFS).
  20. Sharon Kozicki & Peter A. Tinsley, 1997. "Shifting endpoints in the term structure of interest rates," Research Working Paper 97-08, Federal Reserve Bank of Kansas City.
  21. Andrew Ang & Monika Piazzesi, 2001. "A No-Arbitrage Vector Autoregression of Term Structure Dynamics with Macroeconomic and Latent Variables," NBER Working Papers 8363, National Bureau of Economic Research, Inc.
  22. Evans, Charles L. & Marshall, David A., 2007. "Economic determinants of the nominal treasury yield curve," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1986-2003, October.
  23. Knez, Peter J & Litterman, Robert & Scheinkman, Jose Alexandre, 1994. " Explorations into Factors Explaining Money Market Returns," Journal of Finance, American Finance Association, vol. 49(5), pages 1861-82, December.
  24. David Jamieson Bolder, 2001. "Affine Term-Structure Models: Theory and Implementation," Staff Working Papers 01-15, Bank of Canada.
  25. De Pace, Pierangelo & Weber, Kyle D., 2013. "High yield spreads, real economic activity, and the financial accelerator," Economics Letters, Elsevier, vol. 121(3), pages 346-355.
  26. Darrell Duffie & Rui Kan, 1996. "A Yield-Factor Model Of Interest Rates," Mathematical Finance, Wiley Blackwell, vol. 6(4), pages 379-406.
  27. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-89, October.
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