A SVECM Model of the UK Economy and The Term Premium

Mardi Dungey and M Tugrul Vehbi
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M Tugrul Vehbi: School of Economics and Finance, University of Tasmania

No 11610, Working Papers from University of Tasmania, Tasmanian School of Business and Economics

Abstract: The term premium is estimated from an empirically coherent open economy VAR model of the UK economy where the model speci?cally accounts for the mixed nature of the data and cointegration between some variables. Using this framework the estimated negative term premia for 1980-2007 is decomposed into its contributing shocks, where the role of in?ation and monetary policy shocks are shown to be dominant in the evolution of the term premium. Projecting into the 2008 crisis period reveals the extent of the shocks to the UK economy, and also shows the similarities in term premia behaviour with those experienced during the 1998 Russian crisis.

Keywords: Consumer Economics: Theory; Consumer Economics: Empirical Analysis; Demographic Economics (search for similar items in EconPapers)
Pages: 29 pages
Date: 2011-05
New Economics Papers: this item is included in nep-cba and nep-mon
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Citations: View citations in EconPapers (1)

Published by University of Tasmania, School of Economics & Finance -Thesis 2006

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Working Paper: A SVECM Model of the UK Economy and The Term Premium (2011)
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