Accounting for a shift in term structure behavior with no-arbitrage and macro-finance models

Journal of Money, Credit and Banking

Volumn 39, Issue 2-3, 2007, Pages 395-422

  Rudebusch, Glenn D ^a   Wu, Tao ^b  

^a FEDERAL RESERVE BANK OF SAN FRANCISCO   (United States)

^b FEDERAL RESERVE BANK OF DALLAS   (United States)

Author keywords

Inflation target; Term premium; Yield curve

Indexed keywords

EID: 34247535984     PISSN: 00222879     EISSN: None     Source Type: Journal    
DOI: 10.1111/j.0022-2879.2007.00030.x     Document Type: Article

References (44)

1. Andrews, Donald. (1993) "Tests for Parameter Instability and Structural Change with Unknown Change Point." Econometrica, 61, 821-56.
2. Ang, Andrew, and Geert Bekaert. (2002) "Regime Switches in Interest Rates." Journal of Business and Economic Statistics, 20:2, 163-82.
3. Ang, Andrew, and Monika Piazzesi. (2003) "No-Arbitrage Vector Autoregression of Term Structure Dynamics with Macroeconomic and Latent Variables." Journal of Monetary Economics, 50, 745-87.
4. Backus, David, Silverio Foresi, Abon Mozumdar, and Liuren Wu. (2001) "Predictable Changes in Yields and Forward Rates. "Journal of Financial Economics, 59:3, 281-311.
5. Bansal, Ravi, and Hao Zhou. (2002) "Term Structure of Interest Rates with Regime Shifts." Journal of Finance, 57, 1997-2043.
6. Blanchard, Olivier, and John Simon. (2001) "The Long and Large Decline in U.S. Output Volatility." Brookings Papers on Economic Activity, 1, 135-64.
7. Bliss, Robert R. (1997) "Testing Term Structure Estimation Methods." In Advances in Futures and Options Research, 9, pp. 197-231. Greenwich, CT, and London: JAI Press.
8. Campbell, John Y., and Robert J. Shiller. (1991) "Yield Spreads and Interest Rate Movements: A Bird's Eye View." Review of Economic Studies, 58, 495-514.
9. Clarida, Richard, Jordi Galí, and Mark Gertler. (2000) "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory." Quarterly Journal of Economics, 115, 147-80.
10. Cogley, Timothy. (2003) "An Exploration of Evolving Term-Structure Relations." Manuscript, University of California- Davis.
11. Constantinides, George M. (1992) "A Theory of the Nominal Term Structure of Interest Rates." Review of Financial Studies, 5, 531-52.
12. Dai, Qiang, and Kenneth J. Singleton. (2000) "Specification Analysis of Affine Term Structure Models. "Journal of Finance, 55, 1943-78.
13. Dai, Qiang, and Kenneth J. Singleton. (2002) "Expectations Puzzles, Time-varying Risk Premia, and Affine Models of the Term Structure. " Journal of Financial Economics, 63, 415-41.
14. Dai, Qiang, Kenneth J. Singleton, and Wei Yang. (2003) "Regime Shifts in a Dynamic Term Structure Model of U.S. Treasury Bond Yields." Stanford University Working Paper.
15. Dewachter, Hans, and Marco Lyrio. (2006) "Macro Factors and the Term Structure of Interest Rates." Journal of Money, Credit and Banking, 38, 119-40.
16. Diebold, Francis, and Celia Chen. (1996) "Testing Structural Stability with Endogenous Break Point: A Size Comparison of Analytic and Bootstrap Procedures. "Journal of Econometrics, 70, 221-41.
17. Diebold, Francis, Glenn D. Rudebusch, and S. Boragan Aruoba. (2004) "The Macroeconomy and the Yield Curve: A Dynamic Latent Factor Approach." Journal of Econometrics, 131, 309-38.
18. Duffee, Gregory R. (2002) "Term Premia and Interest Rate Forecasts in Affine Models. "Journal of Finance, 57, 405-43.
19. Duffee, Gregory R. (2006) "Term Structure Estimation without Using Latent Factors. "Journal of Financial Economics, 79:3, 507-36.
20. Duffie, Darrell, and Rui Kan. (1996) "A Yield-Factor Model of Interest Rates. "Mathematical Finance, 6, 379-406.
21. Fuhrer, Jeffrey C. (1996) "Monetary Policy Shifts and Long-Term Interest Rates." Quarterly Journal of Economics, 111, 1183-1209.
22. Gallmeyer, Michael, Burton Hollifield, and Stanley Zin. (2005) "Taylor Rules, McCallum Rules and the Term Structure of Interest Rates." Journal of Monetary Economics, 52, 921-50.
23. Hamilton, James D. (1988) "Rational-Expectations Econometric Analysis of Changes in Regime: An Investigation of the Term Structure of Interest Rates." Journal of Economic Dynamics and Control, 12, 385-423.
24. Hördahl, Peter, Oreste Tristani, and David Vestin. (2004) "A Joint Econometric Model of Macroeconomic and Term Structure Dynamics." Journal of Econometrics, 131, 405-44.
25. Judd, John, and Glenn Rudebusch. (1998) "Taylor's Rule and the Fed: 1970-1997." Economic Review, Federal Reserve Bank of San Francisco, 3, 3-16.
26. Kim, Chang-Jin, and Charles R. Nelson. (1999) "Has the U.S. Economy Become More Stable? A Bayesian Approach Based on a Markov-Switching Model of the Business Cycle." The Review of Economics and Statistics, 81, 608-16.
27. Kozicki, Sharon, and Peter A. Tinsley. (2001) "Shifting Endpoints in the Term Structure of Interest Rates." Journal of Monetary Economics, 47, 613-52.
28. Kozicki, Sharon, and Peter A. Tinsley. (2005) "What Do You Expect? Imperfect Policy Credibility and Tests of the Expectations Hypothesis." Journal of Monetary Economics, 52, 421-47.
29. Lange, Joe, Brian Sack, and William Whitesell. (2003) "Anticipations of Monetary Policy in Financial Markets." Journal of Money, Credit and Banking, 35:6, 889-909.
30. Litterman, Robert, and Jose A. Scheinkman. (1991) "Common Factors Affecting Bond Returns." Journal of Fixed Income, 1, 54-61.
31. Mankiw, N. Gregory, and Jeff A. Miron. (1986) "The Changing Behavior of the Term Structure of Interest Rates." Quarterly Journal of Economics, 101, 211-28.
32. McConnell, Margaret M., and Gabriel Perez-Quiros. (2000) "Output Fluctuations in the United States: What Has Changed Since the Early 1980's." American Economic Review, 90:5, 1464-76.
33. Moreno, Antonio. (2004) "Reaching Inflation Stability. "Journal of Money, Credit and Banking, 36, 801-25.
34. O'Reilly, Gerard, and Karl Whelan. (2004) "Has Euro-Area Inflation Persistence Changed Over Time?" The Review of Economics and Statistics, 87, 709-20.
35. Piazzesi, Monika. (2005) "Bond Yields and the Federal Reserve. "Journal of Political Economy, 113, 311-44.
36. Rudebusch, Glenn D. (1995) "Federal Reserve Interest Rate Targeting, Rational Expectations, and the Term Structure." Journal of Monetary Economics, 24, 245-74.
37. Rudebusch, Glenn D. (2002) "Term Structure Evidence on Interest Rate Smoothing and Monetary Policy Inertia." Journal of Monetary Economics, 49, 1161-87.
38. Rudebusch, Glenn D. (2005) "Assessing the Lucas Critique in Monetary Policy Models." Journal of Money, Credit and Banking, 37, 245-72.
39. Rudebusch, Glenn D., and Tao Wu. (2004) "A Macro-Finance Model of the Term Structure, Monetary Policy, and the Economy." Manuscript, Federal Reserve Bank of San Francisco.
40. Stock, James H., and Mark W. Watson. (2003) "Has the Business Cycle Changed? Evidence and Explanations." In Monetary Policy and Uncertainty, Federal Reserve Bank of Kansas City, 9-56.
41. Swanson, Eric T. (2006) "Have Increases in Federal Reserve Transparency Improved Private Sector Interest Rate Forecasts?" Journal of Money, Credit and Banking, 38, 791-819.
42. Taylor, John B. (1993) "Discretion versus Policy Rules in Practice." Carnegie-Rochester Conference Series on Public Policy, 39, 195-214.
43. Watson, Mark W. (1999) "Explaining the Increased Variability in Long-Term Interest Rates." Federal Reserve Bank of Richmond Economic Quarterly, 85:4, 71-96.
44. Wu, Tao. (2006) "Macro Factors and the Affine Term Structure of Interest Rates." Journal of Money, Credit and Banking, 38, 1847-75.