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The macroeconomic determinants of the US term structure during the Great Moderation

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  • Paccagnini, Alessia

Abstract

We study the relation between the macroeconomic variables and the term structure of interest rates during the Great Moderation. We interpolate a term structure using three latent factors of the yield curve to analyze the responses of all maturities to macroeconomic shocks. A Nelson–Siegel model is implemented to estimate the latent factors which correspond to the level, the slope, and the curvature of the curve. As policy implication, the interpolated term structure informs the policymaker how all the macroeconomic shocks impact the whole term structure, even if the impact has a different magnitude across maturities.

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  • Paccagnini, Alessia, 2016. "The macroeconomic determinants of the US term structure during the Great Moderation," Economic Modelling, Elsevier, vol. 52(PA), pages 216-225.
    • Handle: RePEc:eee:ecmode:v:52:y:2016:i:pa:p:216-225
    DOI: 10.1016/j.econmod.2014.11.013
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    More about this item

    Keywords

    Term structure of interest rates; Yield curve; VAR; Factor model;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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