New-Keynesian Macroeconomics and the Term Structure

Geert Bekaert, Seonghoon Cho and Antonio Moreno ()

No 5956, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This article complements the structural New-Keynesian macro framework with a no-arbitrage affine term structure model. Whereas our methodology is general, we focus on an extended macro-model with unobservable processes for the inflation target and the natural rate of output which are filtered from macro and term structure data. We find that term structure information helps generate large and significant estimates of the Phillips curve and real interest rate response parameters. Our model also delivers strong contemporaneous responses of the entire term structure to various macroeconomic shocks. The inflation target dominates the variation in the 'level factor' whereas monetary policy shocks dominate the variation in the 'slope and curvature factors'.

Keywords: Monetary policy; Inflation target; Term structure of interest rates; Phillips curve (search for similar items in EconPapers)
JEL-codes: E31 E32 E43 E52 G12 (search for similar items in EconPapers)
Date: 2006-11
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Related works:
Journal Article: New Keynesian Macroeconomics and the Term Structure (2010)
Working Paper: New-Keynesian Macroeconomics and the Term Structure (2005)
Working Paper: New-Keynesian Macroeconomics and the Term Structure (2004)
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