The Quality of Public Information and The Term Structure of Interest Rates

Frederik Lundtofte ()

No 06-24, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This paper analyzes the term structure of interest rates in an exchangeonly Lucas (1978) economy where consumers learn about a stochastic growth rate through observations of the endowment process and an external public signal. We show that there is a premium for noisy external public information in long-term bonds. In contrast to Feldman (1989), where agents learn only through realized outputs, we find that nonstochastic interest rates are not necessary for the expectations hypothesis to hold.

Keywords: learning; information quality; incomplete information; term structure of interest rates (search for similar items in EconPapers)
JEL-codes: C13 G12 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006-02, Revised 2006-09
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The quality of public information and the term structure of interest rates (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp0624

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