It is well documented in the literature that individual saving decisions vary with the life cycle and at the macroeconomic level, a changing demographic age structure affects aggregated savings, which then drives a slow movement of interest rates. In this paper, we propose a semiparametric...

The phenomenon of “falling stars” in the U.S., declining trends in nominal yields since the 1980s accompanied by falling trends in inflation and real interest rates, calls for a coherent explanation of the long-term driving forces. Using a parsimonious non-parametric method and data on the...

An extended dynamic Nelson-Siegel (DNS) model is developed with an additional functional demographic (FD) factor that considers the overall demographic age distribution as a persistent long-run driving force. The FD factor in the extended DNS model improves the accuracy of the yield curve...