Modeling Bond Yields in Finance and Macroeconomics
From a macroeconomic perspective, the short-term interest rate is a policy instrument under the direct control of the central bank. From a finance perspective, long rates are risk-adjusted averages of expected future short rates. Thus, as illustrated by much recent research, a joint macro-finance modeling strategy will provide the most comprehensive understanding of the term structure of interest rates. We discuss various questions that arise in this research, and we also present a new examination of the relationship between two prominent dynamic, latent factor models in this literature: the Nelson-Siegel and affne no-arbitrage term structure models.
|Date of creation:||Jan 2005|
|Publication status:||published as Diebold, Francis X., Monika Piazzesi and Glenn D. Rudebusch. "Modeling Bonds Yields In Finance And Macroeconomics," American Economic Review, 2005, v95(2,May), 415-420.|
|Note:||AP EFG ME|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Andrew Ang & Monika Piazzesi, 2001.
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NBER Working Papers
8363, National Bureau of Economic Research, Inc.
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- Glenn D. Rudebusch & Tao Wu, 2004.
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Federal Reserve Bank of San Francisco, issue Mar.
- GlennD. Rudebusch & Tao Wu, 2008. "A Macro-Finance Model of the Term Structure, Monetary Policy and the Economy," Economic Journal, Royal Economic Society, vol. 118(530), pages 906-926, 07.
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- Diebold, Francis X. & Li, Canlin, 2003.
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CFS Working Paper Series
2004/09, Center for Financial Studies (CFS).
- Diebold, Francis X. & Li, Canlin, 2006. "Forecasting the term structure of government bond yields," Journal of Econometrics, Elsevier, vol. 130(2), pages 337-364, February.
- Francis X. Diebold & Canlin Li, 2003. "Forecasting the Term Structure of Government Bond Yields," NBER Working Papers 10048, National Bureau of Economic Research, Inc.
- Francis X. Diebold & Canlin Li, 2002. "Forecasting the Term Structure of Government Bond Yields," Center for Financial Institutions Working Papers 02-34, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Glenn D. Rudebusch & Tao Wu, 2007. "Accounting for a Shift in Term Structure Behavior with No-Arbitrage and Macro-Finance Models," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 395-422, 03.
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"No-Arbitrage Taylor Rules,"
NBER Working Papers
13448, National Bureau of Economic Research, Inc.
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- 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.
- Diebold, Francis X. & Rudebusch, Glenn D. & Borag[caron]an Aruoba, S., 2006. "The macroeconomy and the yield curve: a dynamic latent factor approach," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 309-338.
- Tao Wu & Glenn Rudebusch, 2003. "Macroeconomics and the Yield Curve," Computing in Economics and Finance 2003 206, Society for Computational Economics.
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