Coleção Insper Business and Economics Working Papers
URI permanente para esta coleçãohttps://repositorio.insper.edu.br/handle/11224/5740
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Working Paper A New-Keynesian Model of the Yield Curve with Learning Dynamics: A Bayesian Evaluation(2011) Dewachter, Hans; Iania, Leonardo; Lyrio, Marco Túlio PereiraWe estimate a New-Keynesian macro-finance model of the yield curve incorporating learning by private agents with respect to the long-run expectation of ináation and the equilibrium real interest rate. A preliminary analysis shows that some liquidity premia, expressed as a degree of mispricing relative to no-arbitrage restrictions, and time variation in the prices of risk are important features of the data. These features are, therefore, included in our learning model. The model is estimated on U.S. data using Bayesian techniques. The learning model succeeds in explaining the yield curve movements in terms of macroeconomic shocks. The results also show that the introduction of a learning dynamics is not sufficient to explain the rejection of the extended expectations hypothesis. The learning mechanism, however, reveals some interesting points. We observe an important diference between the estimated ináation target of the central bank and the perceived long-run ináation expectation of private agents, implying the latter were weakly anchored. This is especially the case for the period from mid-1970s to mid-1990s. The learning model also allows a new interpretation of the standard level, slope, and curvature factors based on macroeconomic variables. In line with standard macro-finance models, the slope and curvature factors are mainly driven by exogenous monetary policy shocks. Most of the variation in the level factor, however, is due to shocks to the output-neutral real rate, in contrast to the mentioned literature which attributes most of its variation to long-run ináation expectations.Working Paper Information in the Yield Curve: A Macro-Finance Approach(2011) Dewachter, Hans; Iania, Leonardo; Lyrio, Marco Túlio PereiraThis paper uses an affine term structure model that incorporates macroeconomic and financial factors to study the term premium in the U.S. bond market. The results corroborate the known rejection of the expectation hypothesis and indicate that one factor, closely related to the Cochrane and Piazzesi (2005) factor (the CP factor), is responsible for most of then variation in bond premia. Furthermore, the model-implied bond premia are able to explain around 32% and 40% of the variability of one- and two-year excess returns and their out-of-sample performance is comparable to the one obtained with the CP factor. The model is also used to decompose yield spreads into an expectations and a term premium componente in order to forecast GDP growth and ináation. Although this decomposition does not seem important to forecast GDP growth it is crucial to forecast ináation for most forecasting horizons. Also, the inclusion of control variables such as the short-term interest rate and lagged variables does not drive out the predictive power of the yield spread decomposition.