A Theory of the Term Structure of Interest Rates under Limited Household Risk Sharing

• 成果类型: Article
• 署名作者: Mitra, Indrajit; Xu, Yu
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Atlanta; University of Delaware
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhae011
• 发表日期: 2024
• 页码: 2461
• 关键词: equilibrium unemployment; cyclical behavior; asset prices; labor-market; yield curve; consumption; MODEL; bond; real; predictability

摘要

We present a theory in which the interaction between limited sharing of idiosyncratic labor income risk and labor adjustment costs (that endogenously arise through search frictions) determines interest rate dynamics. In the general equilibrium, the interaction of these two ingredients relates bond risk premiums, cross-sectional skewness of income growth, and labor market tightness. Our model rationalizes an upward-sloping average yield curve and predicts a negative relation between labor market tightness and bond risk premiums. We provide evidence for our theory's mechanism and predictions.