Monetary Policy, Bond Risk Premia, and the Economy

Peter Ireland

No 852, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: This paper develops an affine model of the term structure of interest rates in which bond yields are driven by observable and unobservable macroeconomic factors. It imposes restrictions to identify the effects of monetary policy and other structural disturbances on output, inflation, and interest rates and to decompose movements in long-term rates into terms attributable to changing expected future short rates versus risk premia. The estimated model highlights a broad range of channels through which monetary policy affects risk premia and the economy, risk premia affect monetary policy and the economy, and the economy affects monetary policy and risk premia.

Keywords: term structure; risk premia; monetary policy; macroeconomic performance (search for similar items in EconPapers)
JEL-codes: E32 E43 E44 E52 G12 (search for similar items in EconPapers)
Date: 2014-02-01
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Monetary policy, bond risk premia, and the economy (2015)
Working Paper: Monetary Policy, Bond Risk Premia, and the Economy (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:852

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