The estimation of dynamic term structure models (DTSMs) turns out to be challenging in the presence of a small sample. It is exacerbated if the sample is characterized by a prolonged period of low interest rates near a time-varying effective lower bound. These challenges all weigh heavily when...

What share of asset price movements is driven by news? We build a large, time-stamped event database covering scheduled macro news as well as unscheduled events. We find that news account for about 50% of all bond and stock price movements in the United States and euro area since 2002,...

The evolution of the yields of different maturities is related and can be described by a reduced number of commom latent factors. Multifactor interest rate models of the finance literature, common factor models of the time series literature and others use this property. Each model has advantages...

From 2014 until present, housing prices in Germany have been rising faster than consumer prices in all quarters except one, raising concerns about an excessive over-heating of the housing market. To assess the vulnerability of the German housing market to a future realignment of prices or even a...

From September 2011 to January 2015, the Swiss National Bank (SNB) implemented a minimum exchange rate regime (i.e. a one-sided target zone) vis-a-vis the euro to fight deflationary pressures in the aftermath of the Great Financial Crisis. During this period of unconventional monetary policy,...

This paper presents a novel Bayesian method for estimating dynamic stochastic general equilibrium (DSGE) models subject to a constrained posterior distribution of the implied Sharpe ratio. We apply our methodology to a DSGE model with habit formation in consumption and leisure, using an estimate...

We investigate the pass-through of monetary policy to bank lending rates in the euro area during the sovereign debt crisis, in comparison to the pre-crisis period. We make the following contributions. First, we use a factor-augmented vector autoregression, which allows us to assess the responses...

Expectations about macroeconomic developments are important determinants of long term interest rates. In this paper, I compare two different assumptions on how agents may form their expectations about the economy and yields in a pseudo real time exercise. Based on the no-arbitrage...

This paper studies the bank-sovereign link in a dynamic stochastic general equilibrium set-up with strategic default on public debt. Heterogeneous banks give rise to an interbank market where government bonds are used as collateral. A default penalty arises from a breakdown of interbank...

This paper develops high-frequency econometric methods to test for jumps in the spread of bond yields. We derive a coherent inference procedure that detects a jump in the yield spread only if at least one of the two underlying bonds displays a jump. We formalize the test as a sequential...