Developments in Macro-Finance Yield Curve Modelling
Developments in Macro-Finance Yield Curve Modelling
Alain C. J. Durré, European Central Bank, Frankfurt
Michael A. S. Joyce, Bank of England
Lucio Sarno, City University London
Changes in the shape of the yield curve have traditionally been one of the key macroeconomic indicators of a likely change in economic outlook. However, the recent financial crises have created a challenge to the management of monetary policy, demanding a revision in the way that policymakers model expected changes in the economy. This volume brings together central bank economists and leading academic monetary economists to propose new methods for modelling the behaviour of interest rates. Topics covered include: the analysis and extraction of expectations of future monetary policy and inflation; the analysis of the short-term dynamics of money market interest rates; the reliability of existing models in periods of extreme market volatility and how to adjust them accordingly; and the role of government debt and deficits in affecting sovereign bond yields and spreads. This book will interest financial researchers and practitioners as well as academic and central bank economists.
- Proposes new methods for modelling the behaviour of interest rates and analyses how the recent financial crises have changed the role of central banks in managing monetary policy
- Features reflections from top academics and central bankers on the possible limitations of existing models and how to remedy them
- Provides a picture of the current state of macro-finance research and suggests areas where new research is likely to be most productive
Reviews & endorsements
'The term structure of interest rates has always been at the nexus of monetary policy, macroeconomics and finance. The historic lows in policy interest rates since the onset of the crisis have exposed gaps in earlier models of the term structure, leading to new promising research that significantly enhances our understanding. This volume collects state of the art research on the term structure from the academic and policy communities, making it indispensable for both practitioners and policymakers who seek to deepen their knowledge of macro-finance during these challenging times.' Athanasios Orphanides, MIT Sloan School of Management
'This volume examines the challenges posed by the global financial crisis for policymakers and macro-financial economists and shows how they have risen to these. Contributors focus upon the money and bond markets that lay at the centre of this crisis, playing an increasingly important role in the communication and transmission of monetary policy. They suggest new non-linear yield curve models and methods for extracting about future inflation, output and default risk. This volume provides essential reading for policymakers, practitioners and academics interested in the financial sector and the economy.' Peter Spencer, University of York
'This timely conference volume addresses issues that are central to both the research agenda for macroeconomics and finance and to the decisions that policymakers will face as we emerge from the crisis.' Paul Tucker, Former Deputy Governor of the Bank of England
Product details
No date availablePaperback
9781316623169
570 pages
228 × 152 × 31 mm
0.82kg
114 b/w illus. 60 tables
Table of Contents
- Foreword Paul Tucker
- Preface
- 1. Editors' introductory chapter and overview J. S. Chadha, Alain C. J. Durré, M. A. S. Joyce and L. Sarno
- Part I. Keynote Addresses:
- 2. Is the long-term interest rate a policy victim, a policy variable or a policy lodestar? Philip Turner
- 3. Sovereign debt and monetary policy in the euro area Alain C. J. Durré and Frank Smets
- 4. The Federal Reserve's response to the financial crisis: what it did and what it should have done Daniel L. Thornton
- 5. Tail risks and contract design from a financial stability perspective Patrik Edsparr and Paul Fisher
- Part II. New Techniques:
- 6. Compound autoregressive processes and defaultable bond pricing Alain Monfort and Jean-Paul Renne
- 7. Yield curve dimensionality when short rates are near the zero lower bound James M. Steeley
- 8. The intelligible factor model: international comparison and stylized facts Yvan Lengwiler and Carlos Lenz
- 9. Estimating the policy rule from money market rates when target rate changes are lumpy Jean-Sébastien Fontaine
- 10. Developing a practical yield curve model: an odyssey M. A. H. Dempster, Jack Evans and Elena Medova
- Part III. Policy:
- 11. The repo and federal funds markets before, during, and emerging from the financial crisis Morten Bech, Elizabeth Klee and Viktors Stebunovs
- 12. Taylor rule uncertainty: believe it or not Andrea Buraschi, Andrea Carnelli and Paul Whelan
- Part IV. Estimating Inflation Risk:
- 13. Inflation compensation and inflation risk premia in the euro area term structure of interest rates Juan Angel Garcia and Thomas Werner
- 14. The predictive content of the yield curve for inflation Hans Dewachter, Leonardo Iania and Marco Lyrio
- 15. Inflation risk premium and the term structure of macroeconomic announcements in the euro area and the United States Marcello Pericoli
- Part V. Default Risk:
- 16. A term structure model for defaultable European sovereign bonds Priscilla Burity, Marcelo Medeiros and Luciano Vereda
- 17. Some considerations on debt and interest rates Luigi Marattin, Paolo Paesani and Simone Salotti
- Index.
