This paper contains a statistical description of the whole U.S. forward rate curve (FRC), based on data from the period 1990-1996. We find that the average deviation of the FRC from the spot rate grows as the square- root of the maturity, with a proportionality constant which is comparable to...

Dynamic term structure models (DTSMs) price interest rate derivatives based on the model­ implied fair values of the yield curve, ignoring any pricing residuals on the yield curve that are either from model approximations or market imperfections. In contrast, option pricing in practice often...

This paper considers a class of Heath-Jarrow-Morton (1992) term structure models, characterized by time deterministic volatilities for the instantaneous forward rate. The bias that arises from using observed futures yields as a proxy for the unobserved instantaneous forward rate is analyzed. The...

This paper studies the role of collateral constraints in transforming small monetary shocks into large persistent output fluctuations. We do this by introducing money in the heterogeneous-agent real economy of Kiyotaki and Moore (1997). Money enters in a cash-in-advance constraint and is...

Using a recently introduced nonparametric test, I investigate two important and distinct asymmetries in cross-country quarterly macroeconomic time series. Asymmetries are suggested by many theories (old and new), and those discovered aid in the selection of the appropriate nonlinear time series...

This paper investigates the dynamics of output, employment and prices in an economy with costs of adjusting labor and prices. In an economy with non convex adjustments costs, firms do not adjust labor and prices continuously to accommodate every shift in demand. Rather, firms adjust employment...

SINCE 1930, EXPECTATIONS HAVE PLAYED AN IMPORTANT ROLE IN ECONOMIC THEORY AND THIS IS BECAUSE ECONOMICS IS GENERALLY CONCERNED WITH THE IMPLICATIONS OF CURRENT ACTIONS FOR THE FUTURE. THIS PAPER THEREFORE ARGUES THAT THE DEVELOPMENT OF RATIONAL EXPECTATIONS THEORY WILL MAKE A MORE SIGNIFICANT...

Through explicitly incorporating analysts' forecasts as observable factors in a dynamic arbitrage- free model of the yield curve, this paper proposes a framework for studying the impact of shifts in market sentiment on interest rates of all maturities. An empirical examination reveals that...

This paper presents econometric analyses on the determination of bank deposit and lending rates using longitudinal Finnish data. Interest rate pass-through is very strong, possibly complete, in the case of lending rates; in the case of deposit rates the pass-through is far from complete, even in...