How should one evaluate investment projects whose CCAPM betas are uncertain? This question is particularly crucial for projects yielding long-lasting impacts on the economy, as is the case for example for many green investments. We define the notion of a certainty equivalent beta. We show that...

Because of the uncertainty about how to model the growth process of our economy, there is still much confusion about which discount rates should be used to evaluate actions having long-lasting impacts, as in the contexts of climate change, social security reforms or large public infrastructures...

This paper analyses the determinants and effects of ECB interventions in times of severe distress. We focus on the Greek government bond market in mid-2010 and use a unique new dataset to show, for the first time, what type of bonds the ECB bought. We then explore the short-term effects of ECB...

It is not immediately clear how to discount distant-future events, like climate change, when the distant-future discount rate itself is uncertain. The so-called “Weitzman-Gollier puzzle” is the fact that two seemingly symmetric and equally plausible ways of dealing with uncertain future...

The efficient rate of return of a zero-coupon bond with maturity <i>t</i> is determined by our expectations about the mean (+), variance (-) and skewness (+) of the growth of aggregate consumption between 0 and <i>t</i>. The shape of the yield curve is thus determined by how these moments vary with <i>t</i>. We...

In this paper we re-investigate the comovements of interest rates in the G7-countries. We propose a structured modus operandi to analyze the time series characteristics of interest rates and to test for common features. We conduct cointegration, serial correlation common feature and codependence...

De Paoli, Scott, and Weeken [2010, Asset pricing implications of a New Keynesian model. Journal of Economic Dynamics and Control 34, 2056-73] study equity and bonds prices in a New Keynesian model with sticky nominal prices. This note argues that their model generates a behavior of the labor...

Restrictions on the risk-pricing in dynamic term structure models (DTSMs) can unleash the power of no-arbitrage by creating a tighter link between cross-sectional and time-series variation of interest rates. This paper presents a new econometric framework for estimation of affine Gaussian DTSMs...

This paper uses long-range dependence techniques to analyse two important features of the US Federal Funds effective rate, namely its persistence and cyclical behaviour. It examines annual, monthly, bi-weekly and weekly data, from 1954 until 2010. Two models are considered. One is based on an...

This paper uses panel vector autoregressive models and simulations of an estimated DSGE model to explore the reaction of Euro–area banks to the global financial crisis. We focus on their interest–rate setting behavior in response to standard macroeconomic shocks. Our main empirical finding...