Working Paper
Macro-finance models of interest rates and the economy
Abstract: During the past decade, much new research has combined elements of finance, monetary economics, and macroeconomics in order to study the relationship between the term structure of interest rates and the economy. In this survey, I describe three different strands of such interdisciplinary macro-finance term structure research. The first adds macroeconomic variables and structure to a canonical arbitrage-free finance representation of the yield curve. The second examines bond pricing and bond risk premiums in a canonical macroeconomic dynamic stochastic general equilibrium model. The third develops a new class of arbitrage-free term structure models that are empirically tractable and well suited to macro-finance investigations.
Keywords: Interest rates; Macroeconomics - Econometric models;
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Bibliographic Information
Provider: Federal Reserve Bank of San Francisco
Part of Series: Working Paper Series
Publication Date: 2010
Number: 2010-01