Nominal Term Structure and Term Premia. Evidence from Chile

Luis Ceballos, Alberto Naudon () and Damian Romero

MPRA Paper from University Library of Munich, Germany

Abstract: The downward trend exhibited in Chile’s nominal term structure since 2003 has been a common pattern shared by other developed and developing economies. To understand the behavior of the nominal yield curve in Chile, we rely on an affine dynamic term structure model (DTMS) which allows to decompose the term structure into the expected short-term premium (related to the monetary policy expectation) and a term premia. We show that most of the fall of long-term interest rates as well as its dynamics are related to the term premia rather than the expected short-term interest rate. With this, we report that the term premia is driven primarily by nominal uncertainty, i.e. the uncertainty for expected inflation and the US term premia.

Keywords: Term premium; Chile; Yield curve; Risk neutral rates (search for similar items in EconPapers)
JEL-codes: E31 E43 E52 G12 H63 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Nominal term structure and term premia: evidence from Chile (2016)
Working Paper: Nominal Term Structure and Term Premia: Evidence from Chile (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:60911

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