Interest Rates under Falling Stars

• 成果类型: Article
• 署名作者: Bauer, Michael D.; Rudebusch, Glenn D.
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - San Francisco
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20171822
• 发表日期: 2020
• 页码: 1316-1354
• 关键词: term structure models; UNCERTAINTY EMPIRICAL-EVIDENCE; Expected returns; monetary-policy; RISK PREMIUMS; yield curve; inflation; arbitrage; bond; cointegration

摘要

Macro finance theory implies that trend inflation and the equilibrium real interest rate are fundamental determinants of the yield curve. However, empirical models of the term structure of interest rates generally assume that these fundamentals are constant. We show that accounting for time variation in these underlying long-run trends is crucial for understanding the dynamics of Treasury yields and predicting excess bond returns. We introduce a new arbitrage-free model that captures the key role that long-run trends play in determining interest rates. The model also provides new, more plausible estimates of the term premium and accurate out-of-sample yield forecasts.