Macroeconomic

Sang-Sub Lee

Journal of Money, Credit and Banking, 1995, vol. 27, issue 2, 549-69

Abstract: This paper investigates the macroeconomic sources of time-varying risk premia in the term structure of interest rates from 1959 to 1988 based on an intertemporal cash-in-advance model of the term structure. While the conditional variance measures of output and monetary uncertainty show significant explanatory power for the risk premia, the cross-equation restrictions implied by the model are not supported by the data. The study also finds evidence of sources of risk premia ignored by the model. Incorporating possible effects of omitted factors improves the model's ability to explain the cross-sectional behavior and the variability of the risk premia significantly. Copyright 1995 by Ohio State University Press.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:27:y:1995:i:2:p:549-69

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