The Recent Shift in Term Structure Behavior from a No-Arbitrage Macro-Finance Perspective

Tao Wu () and Glenn Rudebusch

No 3, Computing in Economics and Finance 2005 from Society for Computational Economics

Abstract: This paper examines a recent shift in the dynamics of the term structure and interest rate risk. We first use standard yield-spread regressions to document such a shift in the U.S. in the mid-1980s. Over the pre- and post-shift subsamples, we then estimate dynamic, affine, no-arbitrage models, which exhibit a significant difference in behavior that can be largely attributed to changes in the pricing of risk associated with a "level" factor. Finally, we suggest a link between the shift in term structure behavior and changes in the risk and dynamics of the inflation target as perceived by investors

JEL-codes: E43 E44 G12 (search for similar items in EconPapers)
Date: 2005-11-11
New Economics Papers: this item is included in nep-fin, nep-mac and nep-mon
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http://repec.org/sce2005/up.1878.1102110325.pdf (application/pdf)

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Working Paper: The recent shift in term structure behavior from a no-arbitrage macro-finance perspective (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:sce:scecf5:3

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