Stylized Facts on Nominal Term Structure and Business Cycles: An Empirical VAR Study

Wu, Tao

doi:10.24148/wp2002-08

Working Paper

Stylized Facts on Nominal Term Structure and Business Cycles: An Empirical VAR Study

Abstract: This paper examines the importance of various macroeconomic shocks in explaining the movement of the term structure of nominal bond yields in the post-war U.S., as well as the channels through which such macro shocks influence the yield curve, using a structural Vector Autoregressive (VAR) model. The results show that the monetary-policy and the aggregate-supply shocks are important determinants of the nominal term structure. Moreover, the monetary-policy innovations have a large but transitory effect on the nominal bond yields, primarily by changing the slope of the yield curve, and the aggregate-supply shocks from private sector have a more persistent effect on the level of the yield curve, but have little effect on the slope of the yield curve.

JEL Classification: C13; C22; E43; E44; E52;

https://doi.org/10.24148/wp2002-08