The Macroeconomy and the Yield Curve: A Nonstructural Analysis

Francis Diebold (), Glenn Rudebusch () and S. Boragan Aruoba ()

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We estimate a model with latent factors that summarize the yield curve (namely, level, slope, and curvature) as well as observable macroeconomic variables (real activity, inflation, and the stance of monetary policy). Our goal is to provide a characterization of the dynamic interactions between the macroeconomy and the yield curve. We find strong evidence of the effects of macro variables on future movements in the yield curve and much weaker evidence for a reverse influence. We also relate our results to a traditional macroeconomic approach based on the expectations hypothesis.

Keywords: Yield curve; term structure; interest rates; macroeconomic fundamentals; factor model; statespace model (search for similar items in EconPapers)
JEL-codes: G1 E4 C5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: 2003-10-21
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Related works:
Working Paper: The Macroeconomy and the Yield Curve: A Nonstructural Analysis (2003)
Working Paper: The macroeconomy and the yield curve: a nonstructural analysis (2003)
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Persistent link: http://EconPapers.repec.org/RePEc:pen:papers:03-024

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