Forecasting Long-Term Interest Rates with a General-Equilibrium Model of the Euro Area: What Role for Liquidity Services of Bonds?

2013 ◽  
Vol 20 (4) ◽  
pp. 383-430 ◽  
Author(s):  
Paolo Zagaglia
Keyword(s):  
General Equilibrium ◽  
Interest Rates ◽  
Euro Area ◽  
Equilibrium Model ◽  
General Equilibrium Model

Sticky Leverage

2016 ◽  
Vol 106 (12) ◽  
pp. 3800-3828 ◽  
Author(s):  
João Gomes ◽  
Urban Jermann ◽  
Lukas Schmid
Keyword(s):  
Interest Rate ◽  
General Equilibrium ◽  
Equilibrium Model ◽  
Debt Maturity ◽  
General Equilibrium Model ◽  
Corporate Debt ◽  
Debt Overhang ◽  
The Real ◽  
Unanticipated Inflation

We develop a tractable general equilibrium model that captures the interplay between nominal long-term corporate debt, inflation, and real aggregates. We show that unanticipated inflation changes the real burden of debt and, more significantly, leads to a debt overhang that distorts future investment and production decisions. For these effects to be both large and very persistent, it is essential that debt maturity exceeds one period. We also show that interest rate rules can help stabilize our economy. (JEL E12, E31, E44, E52, G01, G32, G35)

scholarly journals Understanding Benign Liquidity Traps: The Case of Japan

2017 ◽  
Vol 18 (3) ◽  
pp. 267-282 ◽  
Author(s):  
Stefan Homburg
Keyword(s):  
Monetary Policy ◽  
General Equilibrium ◽  
Interest Rates ◽  
Equilibrium Model ◽  
General Equilibrium Model ◽  
Anglo Saxon ◽  
Liquidity Trap ◽  
Approach Zero

Abstract Japan has been in a benign liquidity trap since the 1990s. In a benign liquidity trap, interest rates approach zero and monetary policy is ineffective but output and employment perform decently. Such a pattern contradicts traditional macro theories. This paper introduces a monetary general equilibrium model that is compatible with Japan’s performance and resolves puzzles associated with liquidity traps. Possible conclusions for Anglo-Saxon countries and eurozone members are also discussed.

scholarly journals A GENERAL EQUILIBRIUM MODEL OF THE TERM STRUCTURE OF INTEREST RATES UNDER REGIME-SWITCHING RISK

2005 ◽  
Vol 08 (07) ◽  
pp. 839-869 ◽  
Author(s):  
SHU WU ◽  
YONG ZENG
Keyword(s):  
General Equilibrium ◽  
Interest Rates ◽  
Term Structure ◽  
Risk Premium ◽  
Equilibrium Model ◽  
Regime Switching ◽  
Yield Curve ◽  
Closed Form Solution ◽  
Form Solution ◽  
General Equilibrium Model

This paper develops a general equilibrium model of the term structure of interest rates in the presence of the systematic risk of regime shifts. The model elucidates the economic nature of the regime-shift risk premium and introduces a new source of time-variation in bond returns. A closed-form solution for the term structure of interest rates is obtained under an affine model using log-linear approximation. The model is estimated by Efficient Method of Moments. The regime-switching risk is found to be statistically significant and mostly affect the long-end of the yield curve.

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