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The Term Structure of Interest Rates in a DSGE Model with Recursive Preferences

Jules van Binsbergen (), Jesus Fernandez-Villaverde (), Ralph Koijen and Juan F Rubio-Ramirez ()

No 15890, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We solve a dynamic stochastic general equilibrium (DSGE) model in which the representative household has Epstein and Zin recursive preferences. The parameters governing preferences and technology are estimated by means of maximum likelihood using macroeconomic data and asset prices, with a particular focus on the term structure of interest rates. We estimate a large risk aversion, an elasticity of intertemporal substitution higher than one, and substantial adjustment costs. Furthermore, we identify the tensions within the model by estimating it on subsets of these data. We conclude by pointing out potential extensions that might improve the model's fit.

JEL-codes: E2 E3 G12 (search for similar items in EconPapers)
Date: 2010-04
New Economics Papers: this item is included in nep-bec, nep-dge, nep-mac and nep-upt
Note: EFG
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Published as van Binsbergen, Jules H. & Fernández-Villaverde, Jesús & Koijen, Ralph S.J. & Rubio-Ramírez, Juan, 2012. "The term structure of interest rates in a DSGE model with recursive preferences," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 634-648.

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Journal Article: The term structure of interest rates in a DSGE model with recursive preferences (2012) Downloads
Working Paper: The Term Structure of Interest Rates in a DSGE Model with Recursive Preferences (2010) Downloads
Working Paper: The Term Structure of Interest Rates in a DSGE Model with Recursive Preferences (2010) Downloads
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