Bond Pricing with a Time‐Varying Price of Risk in an Estimated Medium‐Scale Bayesian DSGE Model

Ian Dew‐becker
Authors registered in the RePEc Author Service: Ian Louis Dew-Becker

Journal of Money, Credit and Banking, 2014, vol. 46, issue 5, 837-888

Abstract: New Keynesian model in which households have Epstein–Zin preferences with time‐varying risk aversion and the central bank has a time‐varying inflation target can match the dynamics of nominal bond prices in the U.S. economy well. The model generates a large steady‐state term spread and its fitting errors for bond yields are comparable to those obtained from a nonstructural three‐factor model, and one‐third smaller than in models with a constant inflation target or risk aversion. Including data on interest rates has large effects on variance decompositions, making investment technology shocks much less important than found in other recent papers.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
https://doi.org/10.1111/jmcb.12130

Related works:
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:wly:jmoncb:v:46:y:2014:i:5:p:837-888

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 Content Delivery ().