Starting from term structure models of the Nelson-Siegel type, this paper proposes to investigate the behavior of the forward rates (and thus of the yields) both in the time domain and in the frequency domain with the advantage of acquiring a complete overview of the nature and persistence of...

We propose a methodology that permits to investigate and forecast the behavior of a variable and its determinants in real time, both in the time and in the frequency domain, starting from a model designed in the time domain, which makes the presentation and evaluation of the results...

The estimates of the U.S. term premium crucially depend upon the ex-ante decision on whether the short-term rate is either an I(0) or an I(1) process. In this paper we estimate a fractionally integrated (I(d)) model which simultaneously determines both the order of integration of the short-term...

This paper argues that the Fed was not stock market bubble-neutral during the last several years. This nonneutrality implies two options: first, the Fed has used monetary policies to prevent the building of the stock market bubble or, second, the Fed has contributed to its development and...

This paper tests the expectations hypothesis (EH) with the data used in Campbell and Shiller's (1991) seminal work on the EH using a Lagrange multiplier test developed recently by Bekaert and Hodrick (2001). This test is applied under the assumption that interest rates are integrated of order...

In this paper we investigate the stock market response to international monetary policy changes in the UK and Germany. Specifically, we analyse the impact of (un)expected changes in UK and German/Euro area policy rates on UK and German aggregate and sectoral equity returns in an event study. The...

This paper estimates the determinants of households' choice between fixed rate (FRM) and adjustable rate mortgage (ARM) contracts, using the Bank of Italy's Survey of Household Income and Wealth. Contrary to the predictions of the theoretical literature, the analysis shows that most household...

Due to economic feedback the actual risk in bonds from changes in Federal Reserve policy should generally be smaller than measured using conventional duration measures. We introduce the notion of Federal Reserve policy durations. For example, target inflation duration, which measures the change...

Simple models of central bank behavior can produce highly complex yield curve shapes. Using the Taylor rule and its extensions as building blocks, we construct a robust framework for generating realistic yield curves and the evolution of the economy. Our main focus is the impact on the yield...

This paper investigates transactions and interest rates on brokered and direct trades in federal funds, Euro-dollar transactions, and repurchase agreements, all of which are used by banks in overnight funding. We expand on earlier work on calendar-day effects in these markets, investigating also...