Uncertainty and the Term Structure of Interest Rates

Jamie Cross, Aubrey Poon and Dan Zhu ()
Authors registered in the RePEc Author Service: Roberto Casarin

No No 12/2023, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

Abstract: We present a new stylized fact about the link between uncertainty and the term structure of interest rates: Unexpectedly heightened uncertainty elicits a lower, steeper, and flatter yield curve. This result is established through a Yields-Macro model that includes dynamic Nelson-Siegel factors of U.S. Treasury yields, and accounts for endogenous feed back with observable measures of uncertainty, monetary policy, and macroeconomic aggregates. It is also robust to three distinct measures of uncertainty pertaining to the financial sector, the macroeconomy and economic policy. An efficient Bayesian algorithm for estimating the class of Yields-Macro models is also developed.

Pages: 35 pages
Date: 2023-10
New Economics Papers: this item is included in nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://hdl.handle.net/11250/3096684

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bny:wpaper:0124

Access Statistics for this paper

More papers in Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School Contact information at EDIRC.
Bibliographic data for series maintained by Helene Olsen ().