This paper presents an equilibrium bond pricing model driven by two stochastic factors: the real interest rate and the expected rate of inflation. The model's parameters are estimated using a maximum likelihood technique based on a Kalman filter. Data on nominal U.S. Treasury securities and...

A presentation of an equilibrium bond-pricing model driven by two stochastic factors: the real interest rate and the expected rate of inflation. The models parameters are estimated using a maximum-likelihood technique based on a Kalman filter.

This paper shows that governments’, rather than individuals’, inhibitions are the only source of segmentation in international capital markets. The paper specifically focuses on two countries, Japan and the U.S., to test the integration of international capital markets. In Japan, the...

I study the effect of government spending on the real exchange rate in a model exhibiting complementarily between consumption at different points in time. I show that the standard result of fiscal expansions causing real appreciations may hold, although not always, in this intertemporal...

I study the effect of a temporary budget deficit, which is financed in the international capital market, on the exchange rate. First, I show that the exchange rate depreciates both in the short and in the long run if the government finances the deficit by selling debt denominated in foreign...