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Data and Code for: Interest Rates Under Falling Stars

Version
V0
Resource Type
Dataset
Creator
  • Bauer, Michael (Federal Reserve Bank of San Francisco)
  • Rudebusch, Glenn (Federal Reserve Bank of San Francisco)
Publication Date
2020-04-15
Free Keywords
yield curve; macro-finance; inflation trend; equilibrium real interest rate; shifting endpoints; bond risk premia
Description
  • Abstract

    Macro-finance theory implies that trend inflation and the equilibrium real interest rate are fundamental determinants of the yield curve. However, empirical models of the term structure of interest rates generally assume that these fundamentals are constant. We show that accounting for time variation in these underlying long-run trends is crucial for understanding the dynamics of Treasury yields and predicting excess bond returns. We introduce a new arbitrage-free model that captures the key role that long-run trends play for interest rates. The model also provides new, more plausible estimates of the term premium and accurate out-of-sample yield forecasts.
Temporal Coverage
  • 1971-12-01 / 2018-03-31
    Time Period: Wed Dec 01 00:00:00 EST 1971--Sat Mar 31 00:00:00 EDT 2018 (1971:Q4 to 2018:Q1)
Geographic Coverage
  • USA
Availability
Download
Relations
  • Is supplement to
    DOI: 10.1257/aer.20171822 (Text)
Publications
  • Bauer, Michael, and Glenn Rudebusch. “Interest Rates Under Falling Stars.” American Economic Review 110, no. 5 (May 2020): 1316–54. https://doi.org/10.1257/aer.20171822.
    • ID: 10.1257/aer.20171822 (DOI)

Update Metadata: 2020-05-18 | Issue Number: 2 | Registration Date: 2020-04-15

Bauer, Michael; Rudebusch, Glenn (2020): Data and Code for: Interest Rates Under Falling Stars. Version: V0. ICPSR - Interuniversity Consortium for Political and Social Research. Dataset. https://doi.org/10.3886/E115622