Monetary policy and the term premium

Timothy Fuerst

Journal of Economic Dynamics and Control, 2015, vol. 52, issue C, A1-A10

Abstract: The term premium has become increasingly important in discussions of monetary policy formulation. This paper reviews two approaches to embedding a variable term premium into an otherwise standard modern DSGE model. The first approach maintains frictionless asset trade but alters preferences so that agents are more averse to the risk in long bonds. The second approach uses traditional preferences, but segments asset trade between long and short bonds. Policy issues are also discussed.

Keywords: Monetary policy; Financial markets; Term premium (search for similar items in EconPapers)
JEL-codes: E32 E44 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:52:y:2015:i:c:p:a1-a10

DOI: 10.1016/j.jedc.2014.09.027

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