Asset prices are a valuable source of information about financial market participants.expectations about key macroeconomic variables. However, the presence of time-varying risk premia requires an adjustment of market prices to obtain the market’s rational assessment of future price and policy...

We incorporate a latent stochastic volatility factor and macroeconomic expectations in an affine model for the term structure of nominal and real rates. We estimate the model over 1999-2016 on U.S. data for nominal and TIPS yields, the realized and implied volatility of T-bonds and survey...

The zero-coupon yield curve is a common input for most financial purposes. The authors consider three popular yield curve datasets, and explore the extent to which the decision as to what dataset to use for an application may have implications on the results. The paper illustrates why such...

This paper introduces a business cycle model that integrates financial markets and endogenous financial volatility at the Zero Lower Bound (ZLB). We derive three key insights: first, central banks can mitigate excess financial volatility at the ZLB by credibly committing to future economic...

Based on empirical VAR models, we investigate the role of (option-implied) stock and bond market volatilities and monetary policy in the determination of the US 10-year term premium. Our preliminary findings are that an unexpected loosening of monetary policy - through a cut in the federal funds...

We assess the impact of large-scale asset purchases, commonly known as quantitative easing (QE), conducted by Sveriges Riksbank and the European Central Bank (ECB) on bond risk premia in the Swedish government bond market. Using a novel arbitrage-free dynamic term structure model of nominal and...

The relative success of Inflation Targeting (IT) amidst widespread rising inflation globally is motivating the Central Bank of Nigeria (CBN) to renew its desire for an IT framework. This paper applies the Time-Varying Parameter Structural Vector Autoregression with the Stochastic Volatility...

Monetary theory typically assumes that the pass-through from policy-controlled interest rates to longer term rates and yields is complete, rapid and symmetric. We investigate these assumptions by applying the Nonlinear ARDL (NARDL) model advanced by Shin, Yu and Greenwood-Nimmo (2013) to the...

How much have the dynamics of US time series and in the particular the transmission of innovations to monetary policy instruments changed over the last century? The answers to these questions that this paper gives are "A lot." and "Probably less than you think.", respectively. We use vector...

We introduce a reduced-form term structure model with closed-form solutions for yields where the short rate and market prices of risk are nonlinear functions of Gaussian state variables. The nonlinear model with three factors matches the time-variation in expected excess returns and yield...