Term Premium Dynamics and the Taylor Rule
2017 ◽
Vol 07
(04)
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pp. 1750011
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Keyword(s):
We explore the bond-pricing implications of an exchange economy where preference shocks result in time-varying term premiums in real yields with a Taylor rule determining inflation dynamics and nominal term premiums. We calibrate the model by matching the term structure of the means and volatilities of nominal yields. Unlike a model with exogenous inflation, a Taylor rule matching empirical properties of inflation leads to nominal term premiums that are volatile at long maturities. Increasing monetary policy aggressiveness decreases the level and volatility of nominal yields.
Keyword(s):
2015 ◽
Vol 19
(1)
◽
Keyword(s):
Understanding the Impact of Monetary Policy in Korea using a Macro-Finance Term Structure Model with
2014 ◽
Vol 22
(2)
◽
pp. 161-192
Keyword(s):
2017 ◽
Vol 473
◽
pp. 522-535
◽
2014 ◽
Vol 19
(4)
◽
pp. 913-930
◽
Keyword(s):
2016 ◽
Vol 41
(4)
◽
pp. 27-44
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