We study the equilibrium properties of a business cycle model with financial frictions and price adjustment costs. Capital-constrained entrepreneurs finance risky projects by borrowing from banks. Banks, in turn, make loans using equity and deposits. Because financial contracts are not...

The mainstream inflation-targeting literature makes the strong assumption that the central bank can exactly target the interest rate which affects investment and consumption decisions and hence the money supply plays no role in the monetary policy strategy. This assumption is equivalent to...

The mainstream inflation-targeting literature makes the strong assumption that the central bank can exactly target the interest rate which affects investment and consumption decisions and hence the money supply plays no role in the monetary policy strategy. This assumption is equivalent to...

This paper suggests a term structure model which parsimoniously exploits a broad macroeconomic information set. The model does not incorporate latent yield curve factors, but instead uses the common components of a large number of macroeconomic variables and the short rate as explanatory...

This paper estimates yield curve models for the UK, where the underlying determinants have a macroeconomic interpretation. The first factor is an unobserved inflation target, the second factor is annual inflation, and the third factor is a 'Taylor rule residual', which, among other things,...

This paper suggests a term structure model which parsimoniously exploits a broad macroeconomic information set. The model does not incorporate latent yield curve factors, but instead uses the common components of a large number of macroeconomic variables and the short rate as explanatory...

I construct a no-arbitrage term structure model with endogenous regime shifts and apply it to Japanese government bond (JGB) yields. This application subjects the short-term interest rate to monetary regime shifts, such as a zero interest rate policy (ZIRP) and normal regimes, which depend on...

This paper develops a macro-finance model of the yield curve and uses this to explain the behavior of the US Treasury market. Unlike previous macro-finance models which assume a homoscedastic error process and suppose that the one-period return is directly observable, I develop a general affine...

This paper describes the joint dynamics of bond yields and macroeconomic variables in a vector autoregression, where identifying restrictions are based on the absence of arbitrage. Using a term structure model with inflation and economic growth factors, we investigate how macro factors affect...

This paper develops a macro-finance model of the yield curve and uses this to explain the behavior of the US Treasury market. Unlike previous macro-finance models which assume a homoscedastic error process and suppose that the one-period return is directly observable, I develop a general affine...