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Macro Factors And The Term Structure Of Interest Rates
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Book Synopsis Macro Factors and the Term Structure of Interest Rates by : Hans Dewachter
Download or read book Macro Factors and the Term Structure of Interest Rates written by Hans Dewachter and published by . This book was released on 2012 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents an essentially affine model of the term structure of interest rates making use of macroeconomic factors and their long-run expectations. The model extends the approach pioneered by Kozicki and Tinsley (2001) by modeling consistently long-run inflation expectations simultaneously with the term structure. Application to the U.S. economy shows the importance of long-run inflation expectations in the modeling of long-term bond yields. The paper also provides a macroeconomic interpretation for the latent factors found in standard finance models of the yield curve: the quot;levelquot; factor represents the long-run inflation expectation of agents; the quot;slopequot; factor captures business cycle conditions; and the quot;curvaturequot; factor expresses a clear independent monetary policy factor.
Book Synopsis Macro Factors and the Affine Term Structure of Interest Rates by : Tao Wu
Download or read book Macro Factors and the Affine Term Structure of Interest Rates written by Tao Wu and published by . This book was released on 2001 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Structural Macro Factors and the Affine Term Structure of Interest Rates by : László Nimród Vulkán
Download or read book Structural Macro Factors and the Affine Term Structure of Interest Rates written by László Nimród Vulkán and published by . This book was released on 2009 with total page 141 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays on the Influence of Macroeconomic Factors on the Term Structure of Interest Rates by : Michael Fischer
Download or read book Essays on the Influence of Macroeconomic Factors on the Term Structure of Interest Rates written by Michael Fischer and published by . This book was released on 2010 with total page 197 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Forecasting the U.S. Term Structure of Interest Rates Using a Macroeconomic Smooth Dynamic Factor Model by : Siem Jan Koopman
Download or read book Forecasting the U.S. Term Structure of Interest Rates Using a Macroeconomic Smooth Dynamic Factor Model written by Siem Jan Koopman and published by . This book was released on 2014 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: We extend the class of dynamic factor yield curve models for the inclusion of macro-economic factors. We benefit from recent developments in the dynamic factor literature for extracting the common factors from a large panel of macroeconomic series and for estimating the parameters in the model. We include these factors into a dynamic factor model for the yield curve, in which we model the salient structure of the yield curve by imposing smoothness restrictions on the yield factor loadings via cubic spline functions. We carry out a likelihood-based analysis in which we jointly consider a factor model for the yield curve, a factor model for the macroeconomic series, and their dynamic interactions with the latent dynamic factors. We illustrate the methodology by forecasting the U.S. term structure of interest rates. For this empirical study we use a monthly time series panel of unsmoothed Fama-Bliss zero yields for treasuries of different maturities between 1970 and 2009, which we combine with a macro panel of 110 series over the same sample period. We show that the relation between the macroeconomic factors and yield curve data has an intuitive interpretation, and that there is interdependence between the yield and macroeconomic factors. Finally, we perform an extensive out-of-sample forecasting study. Our main conclusion is that macroeconomic variables can lead to more accurate yield curve forecasts.
Book Synopsis Analyzing the Term Structure of Interest Rates with Macroeconomic Factor Models by : Arne Halberstadt
Download or read book Analyzing the Term Structure of Interest Rates with Macroeconomic Factor Models written by Arne Halberstadt and published by . This book was released on 2013 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Macro Factors and the Yield Curve by : Peyron Law
Download or read book Macro Factors and the Yield Curve written by Peyron Law and published by . This book was released on 2005 with total page 284 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Term Structure of Interest Rates by : Zbynek Stork
Download or read book Term Structure of Interest Rates written by Zbynek Stork and published by LAP Lambert Academic Publishing. This book was released on 2014-07-08 with total page 124 pages. Available in PDF, EPUB and Kindle. Book excerpt: Macro-finance modelling is an increasingly popular topic. Various approaches have been developing rapidly, usually using econometric techniques. This book focuses on structural approach to an analysis of average yield curve and its dynamics using macroeconomic factors. An underlying model is based on basic Dynamic Stochastic General Equilibrium (DSGE) approach. Log-linearized solution of the model is the key for derivation of yield curve and its main determinants - pricing kernel, price of risk and affine term structure of interest rates - based on no-arbitrage assumption. The book presents a consistent derivation of a structural macro-finance model, with a reasonable computational burden that allows for time varying term premia. A simple VAR model, widely used in macro-finance literature, serves as a benchmark. The two models are briefly compared and analysis shows their ability to fit an average yield curve observed from the data. It also presents a possible importance of this issue for monetary and fiscal institutions. The book should help shed some light on the use of DSGE framework within macro-finance modelling and should be useful for students and researchers in this field.
Book Synopsis The Term Structure of Interest Rates, Monetary Policy, and Macroeconomy by : Fan Dora Xia
Download or read book The Term Structure of Interest Rates, Monetary Policy, and Macroeconomy written by Fan Dora Xia and published by . This book was released on 2014 with total page 105 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies the relationship between the term structure of interest rates, monetary policy, and macroeconomy. The first chapter, A Parsimonious No-Arbitrage Term Structure Model that is Useful for Forecasting, offers a solution to a well-known puzzle in the term structure literature. The puzzle is that while the level, slope and curvature (or the first three principal components of yields) can quite accurately summarize the cross-section of yields at any point in time, different functions of interest rates and other macroeconomic variables appear to be helpful when the goal is to predict future interest rates. My paper proposes a parsimonious representation to capture this feature in a large dataset. In the first step, I run reduced rank regressions of one-year excess returns on a panel of 131 macroeconomic variables and initial forward rates from 1964 to 2007. I find that a single linear combination of macroeconomic variables and forward rates can predict excess returns on two- to five-year maturity bonds with R-squared up to 0.71. The forecasting factor subsumes the tent-shaped linear combination of forward rates constructed by Cochrane and Piazzesi (2003) and explains excess returns better. In the second step, I estimate a restricted Gaussian Affine Term Structure Model (GATSM) with the level, slope and curvature commonly used by most term structure models along with the forecasting factor. Restrictions are derived based on the fact that while cross-sectional information in yields is spanned by the level, slope and curvature, cross-sectional information in expected excess returns is spanned by the forecasting factor. Compared with a conventional GATSM only including the level, slope and curvature, the restricted four-factor GATSM generates plausible countercyclical term premia. The second and third chapter focus on the recent zero lower bound (ZLB) period. In the second chapter, Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound, coauthored with Cynthia Wu, we employ an approximation that makes a nonlinear shadow rate term structure model (SRTSM) extremely tractable for analysis of an economy operating near the zero lower bound for interest rates. We show that such a model offers a better description of the data compared to the widely used GATSM. Moreover, the model can be used to summarize the macroeconomic effects of unconventional monetary policy at the ZLB. Using a simple factor-augmented vector autoregression (FAVAR), we show that the shadow rate calculated by our model exhibits similar dynamic correlations with macro variables of interest in the period since 2009 as the fed funds rate did in data prior to the Great Recession. This result gives us a tool for measuring the effects of monetary policy under the ZLB, using either historical estimates based on the fed funds rate or less precisely measured estimates inferred solely from the new data for the shadow rate alone. We show that the Fed has used unconventional policy measures to successfully lower the shadow rate. Our estimates imply that the Fed's efforts to stimulate the economy since 2009 have succeeded in lowering the unemployment rate by 0.13% relative to where it would have been in the absence of these measure. The third chapter, Effects of Unconventional Monetary Policies on the Term Structure of Interest Rates, offers a complete characterization of effects of unconventional monetary policies on interest rates by examining policies' impacts on the whole yield curve. I make use of the SRTSM to summarize all interest rates with factors of lower dimension so that I can capture responses of all interest rates in a parsimonious way. By investigating how policy announcements affect the three factors and then the whole forward curve accordingly, I find that during the ZLB period, forward rate with short maturities are constrained, while forward rates with long maturities still respond to policy announcements. Following each easing (tightening) policy announcement, long forward rates would decrease (increase) by 10 basis points on average.
Book Synopsis The Dynamics of the Term Structure of Interest Rates in the United States in Light of the Financial Crisis of 2007–10 by : Mr.Carlos I. Medeiros
Download or read book The Dynamics of the Term Structure of Interest Rates in the United States in Light of the Financial Crisis of 2007–10 written by Mr.Carlos I. Medeiros and published by International Monetary Fund. This book was released on 2011-04-01 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the dynamics of the term structure of interest rates in the United States in light of the financial crisis in 2007-10. In particular, this paper assesses the dynamics of the term structure of U.S. Treasury security yields in light of economic and financial events and the monetary policy response since the inception of the crisis in mid-2007. To this end, this paper relies on estimates of the term structure using Nelson-Siegel models that make use of unobservable or latent factors and macroeconomic variables. The paper concludes that both the latent factors and macroeconomic variables explain the dynamics of the term structure of interest rates, and the expectations of the impact on macroeconomic variables of changes in financial factors, and vice versa, have changed little with the financial crisis.
Book Synopsis The effect of domestic and foreign macroeconomic factors on the United States term structure of interest rates by : Chikuang Kuan
Download or read book The effect of domestic and foreign macroeconomic factors on the United States term structure of interest rates written by Chikuang Kuan and published by . This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Effect of Domestic and Foreign Macroeconomic Factors on the U.S. Term Structure of Interest Rates by : Chikuang Kuan
Download or read book The Effect of Domestic and Foreign Macroeconomic Factors on the U.S. Term Structure of Interest Rates written by Chikuang Kuan and published by . This book was released on 2005 with total page 182 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Term Structure Dynamics with Macroeconomic Factors by : Ha-Il Park
Download or read book Term Structure Dynamics with Macroeconomic Factors written by Ha-Il Park and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Affine term structure models (ATSMs) are known to have a trade-off in predicting future Treasury yields and fitting the time-varying volatility of interest rates. First, I empirically study the role of macroeconomic variables in simultaneously achieving these two goals under affine models. To this end, I incorporate a liquidity demand theory via a measure of the velocity of money into affine models. I find that this considerably reduces the statistical tension between matching the first and second moments of interest rates. In terms of forecasting yields, the models with the velocity of money outperform among the ATSMs examined, including those with inflation and real activity. My result is robust across maturities, forecasting horizons, risk price specifications, and the number of latent factors. Next, I incorporate latent macro factors and the spread factor between the short-term Treasury yield and the federal funds rate into an affine term structure model by imposing cross-equation restrictions from no-arbitrage using daily data. In doing so, I identify the highfrequency monetary policy rule that describes the central bank's reaction to expected inflation and real activity at daily frequency. I find that my affine model with macro factors and the spread factor shows better forecasting performance.
Book Synopsis The Dynamics of the Term Structure of Interest Rates in the United States in Light of the Financial Crisis of 2007-2010 by : Mr. Marco Rodriguez Waldo
Download or read book The Dynamics of the Term Structure of Interest Rates in the United States in Light of the Financial Crisis of 2007-2010 written by Mr. Marco Rodriguez Waldo and published by International Monetary Fund. This book was released on 2011-04-01 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the dynamics of the term structure of interest rates in the United States in light of the financial crisis in 2007-10. In particular, this paper assesses the dynamics of the term structure of U.S. Treasury security yields in light of economic and financial events and the monetary policy response since the inception of the crisis in mid-2007. To this end, this paper relies on estimates of the term structure using Nelson-Siegel models that make use of unobservable or latent factors and macroeconomic variables. The paper concludes that both the latent factors and macroeconomic variables explain the dynamics of the term structure of interest rates, and the expectations of the impact on macroeconomic variables of changes in financial factors, and vice versa, have changed little with the financial crisis.
Book Synopsis On the Estimation of Term Structure Models and An Application to the United States by : International Monetary Fund
Download or read book On the Estimation of Term Structure Models and An Application to the United States written by International Monetary Fund and published by International Monetary Fund. This book was released on 2010-11-01 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses the estimation of models of the term structure of interest rates. After reviewing the term structure models, specifically the Nelson-Siegel Model and Affine Term- Structure Model, this paper estimates the terms structure of Treasury bond yields for the United States with pre-crisis data. This paper uses a software developed by Fund staff for this purpose. This software makes it possible to estimate the term structure using at least nine models, while opening up the possibility of generating simulated paths of the term structure.
Book Synopsis Learning, Macroeconomic Dynamics and the Term Structure of Interest Rates by : Hans Dewachter
Download or read book Learning, Macroeconomic Dynamics and the Term Structure of Interest Rates written by Hans Dewachter and published by . This book was released on 2006 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present a macroeconomic model in which agents learn about the central bank's inflation target and the output-neutral real interest rate. We use this framework to explain the joint dynamics of the macroeconomy, and the term structures of interest rates and inflation expectations. Introducing learning in the macro model generates endogenous stochastic endpoints which act as level factors for the yield curve. These endpoints are suffciently volatile to account for most of the variation in long-term yields and inflation expectations. As such, this paper complements the current macro-finance literature in explaining long-term movements in the term structure without reference to additional latent factors.
Book Synopsis The term structure of interest rates and the effects of macroeconomic policy by : Stephen J. Turnovsky
Download or read book The term structure of interest rates and the effects of macroeconomic policy written by Stephen J. Turnovsky and published by . This book was released on 1989 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt:
