Monetary Policy, Bond Risk Premia, and the Economy

Peter Ireland

No 21576, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E32 E43 E44 E52 G12 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-mac and nep-mon
Note: ME
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Citations: View citations in EconPapers (23)

Published as Ireland, Peter N., 2015. "Monetary policy, bond risk premia, and the economy," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 124-140.

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Journal Article: Monetary policy, bond risk premia, and the economy (2015)
Working Paper: Monetary Policy, Bond Risk Premia, and the Economy (2014)
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