Term premia and the maturity composition of the Federal debt: new evidence from the term structure of interest rates

2001 ◽  
Vol 20 (7) ◽  
pp. 519-539 ◽  
Author(s):  
Basma Bekdache
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Federal Debt ◽  
Term Premia ◽  
New Evidence

scholarly journals Term Premia and Inflation Uncertainty: Empirical Evidence from an International Panel Dataset: Comment

2014 ◽  
Vol 104 (1) ◽  
pp. 323-337 ◽  
Author(s):  
Michael D. Bauer ◽  
Glenn D. Rudebusch ◽  
Jing Cynthia Wu
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Small Sample ◽  
Maximum Likelihood Estimates ◽  
Affine Term Structure ◽  
Term Premium ◽  
Affine Term Structure Models ◽  
International Panel ◽  
Term Premia ◽  
Macroeconomic Determinants

Term premia implied by maximum likelihood estimates of affine term structure models are misleading because of small-sample bias. We show that accounting for this bias alters the conclusions about the trend, cycle, and macroeconomic determinants of the term premia estimated in Wright (2011). His term premium estimates are essentially acyclical, and often just parallel the secular trend in longterm interest rates. In contrast, bias-corrected term premia show pronounced countercyclical behavior, consistent with theoretical and empirical arguments about movements in risk premia. (JEL E31, E43, E52, G12, H63)

Term Premia and Inflation Uncertainty: Empirical Evidence from an International Panel Dataset

2011 ◽  
Vol 101 (4) ◽  
pp. 1514-1534 ◽  
Author(s):  
Jonathan H Wright
Keyword(s):  
Interest Rates ◽  
Empirical Evidence ◽  
Term Structure ◽  
Industrialized Countries ◽  
Bond Yields ◽  
Inflation Uncertainty ◽  
Term Structure Model ◽  
Forward Rates ◽  
International Panel ◽  
Term Premia

This paper provides cross-country empirical evidence on term premia. I construct a panel of zero-coupon nominal government bond yields spanning ten industrialized countries and nearly two decades. I hence compute forward rates and use two different methods to decompose these forward rates into expected future short-term interest rates and term premiums. The first method uses an affine term structure model with macroeconomic variables as unspanned risk factors; the second method uses surveys. I find that term premiums declined internationally over the sample period, especially in countries that apparently reduced inflation uncertainty by making substantial changes in their monetary policy frameworks. (JEL E13, E43, E52, G12, H63)

scholarly journals Beauty Contests and the Term Structure

2021 ◽  
Author(s):  
Martin Ellison ◽  
Andreas Tischbirek
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Aggregate Demand ◽  
Significant Proportion ◽  
Real Term ◽  
Quantitative Model ◽  
Discount Factors ◽  
Stochastic Discount Factors ◽  
Beauty Contest ◽  
Term Premia

Abstract A novel decomposition highlights the scope for information to influence the term structure of interest rates. Based on the law of total covariance, we show that real term premia in macroeconomic models contain a component that depends on covariances of realised stochastic discount factors and a component that depends on covariances of expectations of those stochastic discount factors. The covariance of expectations is typically low in macro-finance models, which contributes to the real term premia implied by the models being at least an order of magnitude too small, a result that is unchanged even if we introduce aggregate demand externalities combined with shocks to higher-order beliefs. We argue that generating realistic term premia requires there to be strategic complementarities in the formation of expectations. A quantitative model, in which beliefs are formed in a beauty contest, can explain a significant proportion of observed term premia, when estimated using data on expectations of productivity growth from the Survey of Professional Forecasters.

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