Macroeconomic implications of changes in the term premium

Glenn Rudebusch, Brian P. Sack and Eric Swanson

Review, 2007, vol. 89, issue Jul, 270 pages

Abstract: Linearized New Keynesian models and empirical no-arbitrage macro-finance models offer little insight regarding the implications of changes in bond term premiums for economic activity. This paper investigates these implications using both a structural model and a reduced-form framework. The authors show that there is no structural relationship running from the term premium to economic activity, but a reduced-form empirical analysis does suggest that a decline in the term premium has typically been associated with stimulus to real economic activity, which contradicts earlier results in the literature.

Keywords: Macroeconomics; Finance (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (99)

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Working Paper: Macroeconomic implications of changes in the term premium (2006)
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