Search Results
Working Paper
Mildly Explosive Dynamics in U.S. Fixed Income Markets
We use a recently developed right-tail variation of the Augmented Dickey-Fuller unit root test to identify and date-stamp periods of mildly explosive behavior in the weekly time series of seven U.S. fixed income yield spreads between September 2002 and January 2015. We find statistically significant evidence of such behavior in six of these spreads. Mild explosivity migrates from short-term funding markets to more volatile medium- and long-term markets during the Great Financial Crisis. For some markets, we statistically validate the conjecture, originally suggested by Gorton (2009a,b), that ...
Journal Article
No volatility, no forecasting power for the term spread
Journal Article
Is the bond market irrational?
Journal Article
Is the financial crisis over? a yield spread perspective
Our finding is consistent with some recent, substantial volatility in the U.S. corporate bond market and leaves open a possibility that additional, future shocks to default premia may have long-lived effects.
Journal Article
The effects of large-scale asset purchases on TIPS inflation expectations
Large-scale asset purchases may have limited power to raise TIPS-implied inflation expectations?something that might appeal to policymakers fighting deflation.
Journal Article
The dollar U-turn
Journal Article
The decline in the U.S. personal saving rate: is it real and is it a puzzle?
Since the mid-1990s, the national income and product accounts personal saving rate for the United States has been trending down, dropping into negative territory for three months during the past two years. This paper examines measurement problems surrounding two of the standard definitions of the personal saving rate. The authors conclude that, despite these measurement problems, the recent decline of the U.S. personal saving rate to low levels seems to be a real economic phenomenon and may be a cause for concern for several reasons. After examining several possible explanations for the trend ...
Working Paper
Forecasts of U.S. short-term interest rates: a flexible forecast combination approach
This paper develops a flexible approach to combine forecasts of future spot rates with forecasts from time-series models or macroeconomic variables. We find empirical evidence that accounting for both regimes in interest rate dynamics and combining forecasts from different models helps improve the out-of-sample forecasting performance for US short-term rates. Imposing restrictions from the expectations hypothesis on the forecasting model are found to help at long forecasting horizons.
Working Paper
How did the financial crisis alter the correlations of U.S. yield spreads?
We investigate the pairwise correlations of 11 U.S. fixed income yield spreads over a sample that includes the Great Financial Crisis of 2007-2009. Using cross-sectional methods and non- parametric bootstrap breakpoint tests, we characterize the crisis as a period in which pairwise correlations between yield spreads were systematically and significantly altered in the sense that spreads comoved with one another much more than in normal times. We find evidence that, for almost half of the 55 pairs under investigation, the crisis has left spreads much more correlated than they were previously. ...
Working Paper
A yield spread perspective on the great financial crisis: break-point test evidence
We use a simple partial adjustment econometric framework to investigate the effects of the crisis on the dynamic properties of a number of yield spreads. We find that the crisis has caused substantial disruptions revealed by changes in the persistence of the shocks to spreads as much as by in their unconditional mean levels. Formal breakpoint tests confirm that the financial crisis has been over approximately since the Spring of 2009. The financial crisis can be conservatively dated as a August 2007 ? June 2009 phenomenon, although some yield spread series seem to point out to an end of the ...