Some Comments on a Macro-Finance Model with Stochastic Volatility

Márcio Laurini and João Caldeira
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João Caldeira: Departamento de Economia - UFRGS

No 2012-04, IBMEC RJ Economics Discussion Papers from Economics Research Group, IBMEC Business School - Rio de Janeiro

Abstract: This paper assesses the relation between the yield curve and the main macroeconomic variables in the U.S. between early 1970s and 2000. We revisit the macro-finance model of Diebold et al. (2006) with the inclusion of a stochastic volatility structure for the latent factors and macroeconomic variables. The results indicate that the inclusion of stochastic volatilities modifies the patterns of persistence and the impulse response function (IRF), and improves the in-sample fit of the model.

Keywords: acro-Finance; Term structure of interest rates; stochastic volatility; MCMC; factor models (search for similar items in EconPapers)
JEL-codes: C53 E43 G17 (search for similar items in EconPapers)
Date: 2012-04-04
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