Stochastic Volatility in a Macro-Finance Model of the U.S. Term Structure of Interest Rates 1961-2004

Peter Spencer

Journal of Money, Credit and Banking, 2008, vol. 40, issue 6, 1177-1215

Abstract: This paper generalizes the standard homoscedastic macro-finance model by allowing for stochastic volatility, using the "square root" specification of the mainstream finance literature. Empirically, this specification dominates the standard model because it is consistent with the square root volatility found in macroeconomic time series. Thus it establishes an important connection between the stochastic volatility of the mainstream finance model and macro-economic volatility of the Okun-Friedman type. This research opens the way to a richer specification of both macro-economic and term structure models, incorporating the best features of both macro-finance and mainstream finance models. Copyright (c) 2008 The Ohio State University.

Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (11)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Stochastic Volatility in a Macro‐Finance Model of the U.S. Term Structure of Interest Rates 1961–2004 (2008)
Working Paper: Stochastic Volatility in a Macro-Finance Model of the US Term Structure of Interest Rates 1961-2004 (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:40:y:2008:i:6:p:1177-1215

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().