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|
|Date of revision:|
|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.|
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NBER Working Papers
8363, National Bureau of Economic Research, Inc.
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NBER Working Papers
10616, National Bureau of Economic Research, Inc.
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- 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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