This paper estimates yield curve models for the UK, where the underlying determinants have a macroeconomic interpretation. The first factor is an unobserved inflation target, the second factor is annual inflation, and the third factor is a 'Taylor rule residual', which, among other things,...

No-arbitrage dynamic term structure models (DTSMs) have regularly been used to estimate interest rate expectations and term premia, but are beset by an identification problem that results in inaccurate estimates. I propose the augmentation of DTSMs with overnight indexed swap (OIS) rates to...

Long-horizon interest rates in the major international bond markets fell sharply during 2004 and 2005, at the same time as US policy rates were rising; a phenomenon famously described as a 'conundrum' by Alan Greenspan the Federal Reserve Chairman. But it was arguably the decline in...

This paper combines a structural vector autoregression (SVAR) with a no-arbitrage approach to build a multifactor affine term structure model (ATSM). The resulting no-arbitrage structural vector autoregressive (NA-SVAR) model implies that expected excess returns are driven by the structural...

We explore empirically the theoretical prediction that optimism or pessimism have aggregate effects, in the context of monetary policy. First, we quantify the tone conveyed by FOMC policymakers in their statements using computational linguistics. Second, we identify sentiment as the...

In this paper, we use an estimated DSGE model of the UK economy to investigate perceptions of the effectiveness of monetary policy since the onset of the 2007–08 financial crisis in a number of measures of deflation probability — the Survey of Economic Forecasts, financial-market option...

In the past decade or so, a number of central banks have purchased assets financed by the creation of central bank reserves as a tool for loosening monetary policy – a policy often known as ‘quantitative easing' or ‘QE'. The first half of the paper reviews the international evidence on the...

Recent results suggesting that monetary financing is more expansionary than bond financing in standard New Keynesian models rely on a duality between policy rules for the rate of money growth and the short-term bond rate, rather than a special role for money. We incorporate two features into a...

I assess the use of overnight indexed swap (OIS) rates as measures of monetary policy expectations. I find that one to twelve-month US OIS rates provide measures of investors' interest rate expectations that are comparable to those from corresponding-horizon federal funds futures rates, which...

I assess the use of overnight indexed swap (OIS) rates as measures of monetary policy expectations. I find that one to twelve-month US OIS rates provide measures of investors' interest rate expectations that are comparable to those from corresponding-horizon federal funds futures rates, which...