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.

Keywords: Business cycles; Vector autoregression; Econometric models;

Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: Working Paper Series

Publication Date: 2001

Number: 2002-08