Forward guidance policies are often argued to stimulate economic activity by reducing nominal long term interest rates. We document why a lower nominal long rate is neither necessary nor sufficient for forward guidance to be successful. We determine the mechanisms behind widely varying long rate...

We estimate a medium-scale macro-finance DSGE model of the term structure. By expanding the macro part of macro-finance models, historical fluctuations in US bond yields turn out to be largely consistent with the rational expectations hypothesis. This stands in contrast to extant macro-finance...

Over the past decades, returns on the long-term financial assets as well as the long-run inflation expectations were persistently falling. Moreover, the natural rate was in decline dropping significantly in 2008. We build a model capable to replicate these empirical facts to study the role of...