Modeling Bond Yields in Finance and Macroeconomics

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

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

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: term structure; yield curve; Nelson-Siegel model; affine equilibrium model (search for similar items in EconPapers)
JEL-codes: G1 E4 E5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: 2005-01-01
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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:pen:papers:05-008

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