Authors: | Herrmann, Fabian |
Title: | Evaluating the interplay of term premia, monetary policy, and the economy in the euro area |
Language (ISO): | en |
Abstract: | This paper investigates the interplay of term premia, monetary policy, and the economy in the euro zone. For this purpose I use a no-arbitrage macro-finance model of the term structure of government bond yields as in Ireland (2015), where yields are modeled as linear-affine functions of the state vector. Movements in term premia are captured by an unobservable risk variable. Restric- tions on the dynamic of the state equation are entailed in order to identify the structural model. The model is estimated using Bayesian estimation techniques. The results highlight a rich dynamic between term premia, monetary policy, and the economy. In line with the "practitioners view" I find that an exogenous rise in pre- mia dampens economic activity. Moreover, during the sample period, the ECB lowered the nominal short-term interest rate in response to a rise in term premia. |
URI: | http://hdl.handle.net/2003/34317 http://dx.doi.org/10.17877/DE290R-16394 |
Issue Date: | 2015 |
Appears in Collections: | Sonderforschungsbereich (SFB) 823 |
Files in This Item:
File | Description | Size | Format | |
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DP_4215_SFB823_Herrmann.pdf | DNB | 522.7 kB | Adobe PDF | View/Open |
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