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New-Keynesian Macroeconomics and the Term Structure

Listed author(s):
  • Seonghoon Cho

    ()

    (Korea Development Institute)

  • Antonio Moreno

    ()

    (School of Economics and Business Administration, University of Navarra)

  • Geert Bekaert

    ()

    (Columbia Business School, Columbia University)

This article complements the structural New-Keynesian macro framework with a no-arbitrage affine term structure model. Whereas our methodology is general, we focus on an extended macro-model with an unobservable time varying inflation target and the natural rate of output which are filtered from macro and term structure data. We obtain large and significant estimates of the Phillips curve and real interest rate response parameters. Our model also delivers strong contemporaneous responses of the entire term structure to various macroeconomic shocks. The inflation target dominates the variation in the level factor whereas the monetary policy shocks dominate the variation in the slope and curvature factors.

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File URL: http://www.unav.edu/documents/10174/6546776/1132755883_wp0405.pdf
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Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 04/05.

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Length: 72 pages
Date of creation: 28 Apr 2005
Publication status: Forthcoming, Journal of Money, Credit and Banking
Handle: RePEc:una:unccee:wp0405
Contact details of provider: Web page: http://www.unav.edu/web/facultad-de-ciencias-economicas-y-empresariales

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