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interest rates. The model shows that there is a new source of time-variation in bond term premiums in the presence of regime … marginal utility and bond prices across different regimes. A closed-form solution for the term structure of interest rates is …
Persistent link: https://www.econbiz.de/10005342209
This paper uses the flexible approach of Hamilton (2001) to investigate the nature of nonlinearities in the term structure. The paper reports clear evidence of nonlinearity, in contrast to the affine term structure model and consistent with recent claims in the literature. We find that there is...
Persistent link: https://www.econbiz.de/10005342379
This paper integrates two strands of studies on consumer demand and consumption and provides a unified framework for analyzing consumer behavior employing an intertemporal two-stage budgeting procedure. We take a modified AIDS framework for the demand system and derive a general Euler equation...
Persistent link: https://www.econbiz.de/10005702544
Which pricing kernel restrictions are needed to make low dimensional Markov models consistent with given sets of predictions on aggregate stock-market fluctuations ? This paper develops theoretical test conditions addressing this and related reverse engineering issues arising within a fairly...
Persistent link: https://www.econbiz.de/10005342258
monetary policy actions because monetary policy actions reveal the private information that the Fed has about future inflation …
Persistent link: https://www.econbiz.de/10005130171
related to the credibility of the monetary regime in place, something we measure by the persistence of inflation …
Persistent link: https://www.econbiz.de/10005063720
If country and currency risk premiums are positively correlated, a negative international liquidity shock harms twice the economy, thereby substantially increasing interest rates. This harmful positive correlation between country and currency risk premiums observed in some countries is called...
Persistent link: https://www.econbiz.de/10005328851
Latin American economies are exposed to ubstantial external vulnerability. Domestic imbalances and terms of trade shocks are often exacerbated by sudden financial distress. In this paper we explore ways of overcoming external vulnerability drawing lessons from a detailed comparison of the...
Persistent link: https://www.econbiz.de/10005328899
to assess whether debt Ponzi schemes are feasible and Pareto-improving. We derive conditions in terms of bond interest …
Persistent link: https://www.econbiz.de/10005329027
This paper investigates the properties of optimal monetary and fiscal policy in a two sector small open economy. If the government can optimally select all possible distorting tax rates, then it can implement Pareto efficient outcomes and the Friedman Rule is found to be a necessary condition...
Persistent link: https://www.econbiz.de/10005342198