We examine the relationship between monetary-policy-induced changes in short interest rates and yields on long-maturity default-free bonds. The volatility of the long end of the term structure and its relationship with monetary policy are puzzling from the perspective of simple structural...

Prices of riskfree bonds in any arbitrage-free environment are governed by a pricing kernel: given a kernel, we can compute prices of bonds of any maturity we like. We use observed prices of multi-period bonds to estimate, in a log-linear theoretical setting, the pricing kernel that gave rise to...

Empirical rejections of life cycle models of aggregate consumption are reviewed and an alternative specification is proposed. Observable implication of Euler equations are used to estimate parameters of the utility function using Generalized Method of Moments using monthly U.S. post-war data....

Mathematical models of bond pricing are used by both academics and Wall Street practitioners, with practitioners introducing time-dependent parameters to fit arbitrage-free models to selected asset prices. We show, in a simple one-factor setting, that the ability of such models to reproduce a...

This paper integrates models of atemporal risk preference that relax the independence axiom into a recursive intertemporal asset-pricing framework. The resulting models are amenable to empirical analysis using market data and standard Euler equation methods. We are thereby able to provide the...

This paper studies the time series behaviour of aggregate consumption and asset returns when the representative agent does not (necessarily) maximize the expected value of a von Neumann-Morgenstern utility index. By assuming that agent's intertemporal preferences over stochastic consumption...

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This paper investigates infinite horizon intertemporal utility functions which generalize the standard additive expected utility specification. Two classes of generalization are considered -- the first builds upon Kreps and Porteus (1978, 1979), while the second is a further generalization which...

This paper studies whether fiscal policy satisfies a borrowing constraint. Direct tests of the present-value constraint are rare, despite widespread discussion of the feasibility of current policy. We examine monthly data on Canadian federal government finances using tests for cointegration. We...