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Federal Reserve Bank of San Francisco
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Stylized facts on nominal term structure and business cycles: an empirical VAR study
Tao Wu
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.


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Tao Wu, Stylized facts on nominal term structure and business cycles: an empirical VAR study, Federal Reserve Bank of San Francisco, Working Paper Series 2002-08, 2001.
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Keywords: Business cycles ; Vector autoregression ; Econometric models
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