Economic events and the volatility of government bill rates

Chao Xiao, Yu Lou, Jie Liu, Yuan Zhao and Yikang Tian

PLOS ONE, 2022, vol. 17, issue 10, 1-21

Abstract: Many studies show that in many countries (especially the G7), volatility in government bill rates far exceeds that in consumption growth rates. This volatility puzzle cannot be predicted by traditional disaster models, in which rare economic disasters are defined as a peak-to-trough percent fall in consumption (or real per capita GDP) by a high threshold (≥10%). For this purpose, we extend the traditional definition of rare economic disasters and propose a novel asset pricing model that models both good and bad events. We define a bad (or good) event as a peak-to-trough absolute decline (or a trough-to-peak absolute rise) in consumption growth rates by a low threshold (

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0276345

DOI: 10.1371/journal.pone.0276345

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