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Incomplete markets and the yield curve

Author

Listed:
  • Xavier Ragot

    (CNRS)

  • Francois Le Grand

    (PSE)

  • Edouard Challe

    (CNRS)

Abstract

The bond supply affects the yield curve through a wealth effect. We prove notably that a larger volume of titles shifts the level of the yield curve downward and increases its slope. Finally, credit constraints allow idiosyncratic and aggregate risks to interact and thus make interest rates more volatile.

Suggested Citation

  • Xavier Ragot & Francois Le Grand & Edouard Challe, 2007. "Incomplete markets and the yield curve," 2007 Meeting Papers 715, Society for Economic Dynamics.
    • Handle: RePEc:red:sed007:715
    as

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    References listed on IDEAS

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