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The European Economic and Monetary Union (EMU) has created a new economic area, larger and closer with respect to the rest of the world. Area-specific shocks are thus more important in EMU than country-specific shocks used to be in the previous states, e.g. in Germany. It is thus not surprising...
Persistent link: https://www.econbiz.de/10005136545
We study the bond yield conundrum in a macro-finance framework. Building upon a flexible and non-structural macro-finance model, we test the hypothesis that the bond yield conundrum is connected to various sources of uncertainty in the financial markets. Moreover we explicitly test for the role...
Persistent link: https://www.econbiz.de/10008682889
The emergence of a single interbank market for reserves in the EC following monetary union raises a basic dilemma for policy. Either competition is allowed to decide the location of the interbank market and the national central banks will enter the competition, or the location of this market is...
Persistent link: https://www.econbiz.de/10005788889
This Paper examines how public debt, government credibility and external circumstances affect the probability of exchange rate devaluations in a three-period open-economy version of the Barro-Gordon (1983) model with nominal public debt. Public debt creates a link between current and future...
Persistent link: https://www.econbiz.de/10005791395
This paper brings together two strands of the empirical macro literature: the reduced-form evidence that the yield spread helps in forecasting output and the structural evidence on the difficulties of estimating the effect of monetary policy on output in an intertemporal Euler equation. We show...
Persistent link: https://www.econbiz.de/10005791499
We use a quantitative model of the US economy to analyse the response of long-term interest rates to monetary policy, and compare the model results with empirical evidence. We find that the model can explain the strong and time-varying yield curve response to monetary policy innovations found in...
Persistent link: https://www.econbiz.de/10005792395
Recent research suggests that commonly estimated dynamic Taylor rules augmented with a lagged interest rate imply too much predictability of interest rate changes compared with yield curve evidence. We show that this is not sufficient proof against the Taylor rule: the result could be driven by...
Persistent link: https://www.econbiz.de/10005123552
accumulation only worsens this problem. Increasing the volatility of interest rates through habits partly reduces the size of these … positions but at the cost of introducing extreme volatility in asset holdings. Across these simulations we find no presumption … the required positions, worsens their volatility and in some cases produces instability in debt holdings. We conclude that …
Persistent link: https://www.econbiz.de/10005136601
This paper addresses the issue of forecasting the term structure. We provide a unified state-space modelling framework that encompasses different existing discrete-time yield curve models. Within such framework we analyze the impact on forecasting performance of two crucial modelling choices,...
Persistent link: https://www.econbiz.de/10005497801
We show how to model portfolio models in the presence of long bonds. Specifically we study optimal fiscal policy under incomplete markets where the government issues bonds of maturity N 1. Assuming the existence of long bonds introduces an additional intertemporal mechanism that makes taxes...
Persistent link: https://www.econbiz.de/10011083295