Berardi, Andrea; Torous, Walter - In: Journal of Financial and Quantitative Analysis 40 (2005) 02, pp. 241-258
Relying on a simple general equilibrium model of the term structure, we show that both nominal yields and real consumption growth rates can be affine in the unobservable state variables. We can then express real consumption growth rates in terms of nominal yields rather than the unobservable...