EconPapers    
Economics at your fingertips  
 

Term Structure Dynamics, Macro-Finance Factors and Model Uncertainty

Joseph Byrne (), Shuo Cao and Dimitris Korobilis

Essex Finance Centre Working Papers from University of Essex, Essex Business School

Abstract: This paper models and predicts the term structure of US interest rates in a data rich environment. We allow the model dimension and parameters to change over time, accounting for model uncertainty and sudden structural changes. The proposed time-varying parameter Nelson-Siegel Dynamic Model Averaging (DMA) predicts yields better than standard benchmarks. DMA performs better since it incorporates more macro-finance information during recessions. The proposed method allows us to estimate plausible real-time term premia, whose countercyclicality weakened during the financial crisis.

Keywords: Term Structure of Interest Rates; Nelson-Siegel; Dynamic Model Averaging; Bayesian Methods; Term Premia (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2016-08
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://repository.essex.ac.uk/18195/ original version (application/pdf)

Related works:
Working Paper: Term Structure Dynamics, Macro-Finance Factors and Model Uncertainty (2015) Downloads
Working Paper: Term Structure Dynamics, Macro-Finance Factors and Model Uncertainty (2015) Downloads
Working Paper: Term Structure Dynamics, Macro-Finance Factors and Model Uncertainty (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: https://EconPapers.repec.org/RePEc:esy:uefcwp:18195

Access Statistics for this paper

More papers in Essex Finance Centre Working Papers from University of Essex, Essex Business School Contact information at EDIRC.
Bibliographic data for series maintained by Nikolaos Vlastakis ().

 
Page updated 2019-12-10
Handle: RePEc:esy:uefcwp:18195