A SVECM Model of the UK Economy and The Term Premium

Mardi Dungey and M.tugrul Vehbi

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: The term premium is estimated from an empirically coherent open economy VAR model of the UK economy where the model specifically accounts for the mixed nature of the data and cointegration between some variables. Using this framework the estimated negative term premia for 1980-2007 is decomposed into its contributing shocks, where the role of inflation and monetary policy shocks are shown to be dominant in the evolution of the term premium. Projecting into the 2008 crisis period reveals the extent of the shocks to the UK economy, and also shows the similarities in term premia behaviour with those experienced during the 1998 Russian crisis.

JEL-codes: C32 C51 E43 E52 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2011-08
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: A SVECM Model of the UK Economy and The Term Premium (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2011-26

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