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Modeling yields at the zero lower bound: are shadow rates the solution?

Christensen, Jens Henrik Eggert; Rudebusch, Glenn - Federal Reserve Bank of San Francisco - 2013

Recent U.S. Treasury yields have been constrained to some extent by the zero lower bound (ZLB) on nominal interest rates. In modeling these yields, we compare the performance of a standard affine Gaussian dynamic term structure model (DTSM), which ignores the ZLB, and a shadow-rate DTSM, which...

Persistent link: https://www.econbiz.de/10010728015

A probability-based stress test of Federal Reserve assets and income

Christensen, Jens Henrik Eggert; Lopez, Jose A.; … - Federal Reserve Bank of San Francisco - 2013

To support the economy, the Federal Reserve amassed a large portfolio of long-term bonds. We assess the Fed’s associated interest rate risk — including potential losses to its Treasury securities holdings and declines in remittances to the Treasury. Unlike past examinations of this interest...

Persistent link: https://www.econbiz.de/10011026933

Swiss unconventional monetary policy: lessons for the transmission of quantitative easing

Christensen, Jens Henrik Eggert; Krogstrup, Signe - Federal Reserve Bank of San Francisco - 2014

In August 2011, the Swiss National Bank engaged in unconventional monetary policy through an unprecedented expansion of bank reserves. As these actions did not involve any outright long-term asset purchases, this unique episode allows for novel insights on the transmission mechanism of central...

Persistent link: https://www.econbiz.de/10010884919

Domestic bond markets and inflation

Rose, Andrew; Spiegel, Mark M - Federal Reserve Bank of San Francisco - 2015

This paper explores the relationship between inflation and the existence of a local, nominal, publicly-traded, long …-maturity, domestic-currency bond market. Bond holders are exposed to capital losses through inflation and therefore represent a potential … choose a lower inflation rate. We then check this prediction empirically using a panel of data, examining inflation before …

Persistent link: https://www.econbiz.de/10011188054

Resolving the spanning puzzle in macro-finance term structure models

Bauer, Michael Dominic; Rudebusch, Glenn - Federal Reserve Bank of San Francisco - 2015

Previous macro-finance term structure models (MTSMs) imply that macroeconomic state variables are spanned by (i.e., perfectly correlated with) model-implied bond yields. However, this theoretical implication appears inconsistent with regressions showing that much macroeconomic variation is...

Persistent link: https://www.econbiz.de/10011123659