Term Premia and Inflation Uncertainty: Empirical Evidence from an International Panel Dataset: Comment

Michael Bauer, Glenn Rudebusch and Jing Cynthia Wu

American Economic Review, 2014, vol. 104, issue 1, 323-37

Abstract: Term premia implied by maximum likelihood estimates of affine term structure models are misleading because of small-sample bias. We show that accounting for this bias alters the conclusions about the trend, cycle, and macroeconomic determinants of the term premia estimated in Wright (2011). His term premium estimates are essentially acyclical, and often just parallel the secular trend in longterm interest rates. In contrast, bias-corrected term premia show pronounced countercyclical behavior, consistent with theoretical and empirical arguments about movements in risk premia.

JEL-codes: E31 E43 E52 G12 H63 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.1.323
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Citations: View citations in EconPapers (74)

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