Long Run Risks in the Term Structure of Interest Rates: Estimation
No 137, 2008 Meeting Papers from Society for Economic Dynamics
This paper estimates a long run risk model with term structure data. Inflation and consumption growth both contain correlated long run risk components. The model is estimated by the likelihood-based Bayesian methods and estimates of the latent long run risk factors are extracted from both macro and term structure data. Empirical analysis using US data reveals that a small and persistent component in consumption growth interacting with expected inflation improves the model's fit for the term structure data.
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Journal Article: LONG‐RUN RISKS IN THE TERM STRUCTURE OF INTEREST RATES: ESTIMATION (2013)
Working Paper: Long run risks in the term structure of interest rates: estimation (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed008:137
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More papers in 2008 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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