Economics at your fingertips  

UK term structure decompositions at the zero lower bound

Andrea Carriero, Sarah Mouabbi () and Elisabetta Vangelista

Journal of Applied Econometrics, 2018, vol. 33, issue 5, 643-661

Abstract: This paper employs a zero lower bound (ZLB) consistent shadow‐rate model to decompose UK nominal yields into expectation and term premium components. Compared to a standard affine term structure model, it performs relatively better in a ZLB setting by capturing the stylized facts of the yield curve. The ZLB model is then exploited to estimate inflation expectations and risk premiums. This entails jointly pricing and decomposing nominal and real UK yields. We find evidence that medium‐ and long‐term inflation expectations are contained within narrower bounds since the early 1990s, suggesting monetary policy credibility improved after the introduction of inflation targeting.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)

Related works:
Working Paper: UK term structure decompositions at the zero lower bound (2016) Downloads
Working Paper: UK Term Structure Decompositions at the Zero Lower Bound (2015) Downloads
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:

Ordering information: This journal article can be ordered from
http://www3.intersci ... e.jsp?issn=0883-7252

Access Statistics for this article

Journal of Applied Econometrics is currently edited by M. Hashem Pesaran

More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2023-05-03
Handle: RePEc:wly:japmet:v:33:y:2018:i:5:p:643-661