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

Jules van Binsbergen, Jesus Fernández-Villaverde (), Ralph Koijen and Juan F Rubio-Ramirez
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Jesus Fernández-Villaverde: Department of Economics, University of Pennsylvania
Authors registered in the RePEc Author Service: Jesus Fernandez-Villaverde

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

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.

Keywords: DSGE models; Epstein-Zin preferences; likelihood estimation; yield curve (search for similar items in EconPapers)
JEL-codes: E30 G12 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2010-03-01
New Economics Papers: this item is included in nep-mac and nep-upt
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Citations: View citations in EconPapers (30)

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Related works:
Journal Article: The term structure of interest rates in a DSGE model with recursive preferences (2012)
Working Paper: The Term Structure of Interest Rates in a DSGE Model with Recursive Preferences (2010)
Working Paper: The Term Structure of Interest Rates in a DSGE Model with Recursive Preferences (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:10-011

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