model and estimate by maximum likelihood the parameters governing the market price of risk. We show that agents' beliefs about the joint evolution of macroeconomic variables has changed in quantitatively important and economically meaningful ways. Moreover, macroeconomic factors turn out to be...

Finance models of the term structure of interest rates have for a long time relied on unobserved factors as explanatory variables. In a seminal paper, Ang and Piazzesi (2003) have examined the potential role of macroeconomic variables in explaining the term structure. They, and subsequent...

The macroeconomic costs of disinflation are considered for the United States in a rational expectations macroeconometric model with sticky prices and imperfect information regarding monetary policy objectives. The analysis centers on simulation experiments using the Board’s new quarterly...