This paper develops a DSGE model which explains variation in the nominal and real term structure along with inflation … time-varying term premia. We find a fall in nominal term premia during the 1990s which mainly is due to lower inflation …

comovement is the central bank of the small open economy accommodating foreign inflation trends, rather than systematically … curbing them. (3) Small open economies may find themselves much more affected by changes in US inflation trends than the US …

to generate inflation risks on long-term nominal bonds when placing high coefficient on the output gap in the Taylor rule …. Our model is able to generate inflation risks when the coefficient on the output gap is small. In the entry model real … risks are lower and inflation risks are ceteris paribus higher than in the standard New Keynesian model without entry due to …

monetary policy rule. A less aggressive policy increases the persistence of the reaction of inflation and the short interest …, turns positive the contribution of the inflation premium and drives the term premium up. The paper concludes that by … generating persistent inflation the presence of nominal rigidities can help in reconciling the macro model with the yield curve …

cyclical movements in Treasury bond premia. Downward nominal rigidities create state-dependence in output and inflation … dynamics: a higher level of inflation makes prices more flexible, leading output and inflation to be more volatile, and bonds … to become more risky. The model matches well the relation between the level of inflation and a number of salient macro …

Theory predicts that the equilibrium real interest rate, r*t, and the perceived trend in inflation, ð*t, are key …

We study the role of the cost of inflation channel in determining the risk premium in a (nonlinear) New Keynesian DSGE … model. Relying on a Calvo (or Rotemberg) price setting, we show that while the cost of inflation channel generates the …