We derive an equation of motion for interest-rate yield curves by applying a minimum Fisher information variational approach to the implied probability density. By construction, solutions to the equation of motion recover observed bond prices. More significantly, the form of the resulting...

The authors solve the IS puzzle for the G7 countries. They find that five of the G7 countries have the expected significant negative relationship between the output gap and the real-rate gap; the time series of the remaining two show material deviation from expected IS-curve behavior. The...