Modeling bond yields in finance and macroeconomics

Francis Diebold (), Monika Piazzesi () and Glenn Rudebusch ()

No 2005-04, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: From a macroeconomic perspective, the short-term interest rate is a policy instrument under the direct control of the central bank. From a finance perspective, long rates are risk-adjusted averages of expected future short rates. Thus, as illustrated by much recent research, a joint macro-finance modeling strategy will provide the most comprehensive understanding of the term structure of interest rates. We discuss various questions that arise in this research, and we also present a new examination of the relationship between two prominent dynamic, latent factor models in this literature: the Nelson-Siegel and affine no-arbitrage term structure models.

Keywords: Bonds; Macroeconomics; Finance; Econometric models (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-fmk, nep-mac and nep-mon
Date: Written 2005
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Published in American Economic Review Papers and Proceedings, v. 95, no. 2 (May 2005) pp. 415-420

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http://www.frbsf.org/publications/economics/papers/2005/wp05-04bk.pdf (application/pdf)

Related works:
Working Paper: Modeling Bond Yields in Finance and Macroeconomics (2005)
Working Paper: Modeling Bond Yields in Finance and Macroeconomics (2005)
Working Paper: Modeling Bond Yields in Finance and Macroeconomics (2005)
Journal Article: Modeling Bond Yields in Finance and Macroeconomics (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:fip:fedfwp:2005-04

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