Author: Meredith J. Beechey
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
Book Description
Asymmetric information between the central bank and bond markets creates an inference problem that affects the behaviour of long interest rates. This paper employs a simple macroeconomic model with a time-varying inflation target to illustrate the implications of asymmetry for the sensitivity of long rates and volatility of bond returns. When the central bank's inflation target is not communicated and macroeconomic shocks are imperfectly observed, bond markets infer the value of the target from noisy signals. This heightens the sensitivity of long-run inflation expectations to transitory shocks, thereby raising the measured reaction of long rates to monetary policy and to inflation surprises. Calibrated coeffcients from such regressions are more than twice as large when bondmarkets lack knowledge of the target compared with a full information scenario. Time variation in the inflation target is the main source of volatility, but learning adds to the ability of the model to explain the observed volatility of returns along the yield curve.
Excess Sensitivity and Volatility of Long Interest Rates
Author: Meredith J. Beechey
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
Book Description
Asymmetric information between the central bank and bond markets creates an inference problem that affects the behaviour of long interest rates. This paper employs a simple macroeconomic model with a time-varying inflation target to illustrate the implications of asymmetry for the sensitivity of long rates and volatility of bond returns. When the central bank's inflation target is not communicated and macroeconomic shocks are imperfectly observed, bond markets infer the value of the target from noisy signals. This heightens the sensitivity of long-run inflation expectations to transitory shocks, thereby raising the measured reaction of long rates to monetary policy and to inflation surprises. Calibrated coeffcients from such regressions are more than twice as large when bondmarkets lack knowledge of the target compared with a full information scenario. Time variation in the inflation target is the main source of volatility, but learning adds to the ability of the model to explain the observed volatility of returns along the yield curve.
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
Book Description
Asymmetric information between the central bank and bond markets creates an inference problem that affects the behaviour of long interest rates. This paper employs a simple macroeconomic model with a time-varying inflation target to illustrate the implications of asymmetry for the sensitivity of long rates and volatility of bond returns. When the central bank's inflation target is not communicated and macroeconomic shocks are imperfectly observed, bond markets infer the value of the target from noisy signals. This heightens the sensitivity of long-run inflation expectations to transitory shocks, thereby raising the measured reaction of long rates to monetary policy and to inflation surprises. Calibrated coeffcients from such regressions are more than twice as large when bondmarkets lack knowledge of the target compared with a full information scenario. Time variation in the inflation target is the main source of volatility, but learning adds to the ability of the model to explain the observed volatility of returns along the yield curve.
Excess Sensitivity and Volatility of Long Interest Rates
Excess Volatility and the Smoothing of Interest Rates
Author: Steven Strongin
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 34
Book Description
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 34
Book Description
The Excess Sensitivity of Long-run Term Interest Rates
Author: Refet S. Gurkaynak
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 62
Book Description
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 62
Book Description
The Excess Sensitivity of Long-term Interest Rates
International Convergence of Capital Measurement and Capital Standards
Author:
Publisher: Lulu.com
ISBN: 9291316695
Category : Bank capital
Languages : en
Pages : 294
Book Description
Publisher: Lulu.com
ISBN: 9291316695
Category : Bank capital
Languages : en
Pages : 294
Book Description
When Unit Roots Matter
Author: Pieter Cornelis Schotman
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Excess Volatility and Excess Smoothness of Long Term Interest Rates
When Unit Roots Matter
Author: Pieter Cornelis Schotman
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 80
Book Description
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 80
Book Description
On Expectations, Term Premiums and the Volatility of Long-term Interest Rates
Author: James E. Pesando
Publisher:
ISBN:
Category : Interest
Languages : en
Pages : 27
Book Description
The paper first identifies how large must be the range in which ex ante yields on long-relative to short-term bonds vary if term premiums -- are to account for a significant fraction of the variance of the holding- period yields on long-term bonds. This paper then extends Shiller's bound to the case of a time-varying term premium and readily identifies the variance in the term premium necessary to salvage the efficient markets model if the variance of these holding-period yields exceeds the bound implied by the rational expectations model. The role of transactions costs is noted and the possibility explored that evidence of excess volatility need not imply the existence of unexploited profit opportunities under the rational expectations model
Publisher:
ISBN:
Category : Interest
Languages : en
Pages : 27
Book Description
The paper first identifies how large must be the range in which ex ante yields on long-relative to short-term bonds vary if term premiums -- are to account for a significant fraction of the variance of the holding- period yields on long-term bonds. This paper then extends Shiller's bound to the case of a time-varying term premium and readily identifies the variance in the term premium necessary to salvage the efficient markets model if the variance of these holding-period yields exceeds the bound implied by the rational expectations model. The role of transactions costs is noted and the possibility explored that evidence of excess volatility need not imply the existence of unexploited profit opportunities under the rational expectations model