In this paper we develop on the VAR framework, originally proposed by Campbell and Shiller (J. Political Econom 95 (1987) 1062) to evaluate the Expectations Theory, along three dimensions: the use of a testing method based on a real-time procedure, the measurement of the risk premium, the specification of the implicit monetary policy maker’s reaction function. We use financial factors and macroeconomic information to construct a test of the theory based on simulating investors’ effort to use the model in ‘real-time’ to forecast future monetary policy rates. The application of our approach to a monthly sample of US data from the eighties onward leads us to conclude that the deviation from the ET are very rarely significant and that fluctuations of risk premia are not large.

Carriero A, Favero C., Kaminska I (2006). Financial factors, macroeconomic information and the Expectations Theory of the term structure of interest rates. JOURNAL OF ECONOMETRICS, 131, 339-358 [http://dx.doi.org/10.1016/j.jeconom.2005.01.019].

Financial factors, macroeconomic information and the Expectations Theory of the term structure of interest rates

Carriero A;
2006

Abstract

In this paper we develop on the VAR framework, originally proposed by Campbell and Shiller (J. Political Econom 95 (1987) 1062) to evaluate the Expectations Theory, along three dimensions: the use of a testing method based on a real-time procedure, the measurement of the risk premium, the specification of the implicit monetary policy maker’s reaction function. We use financial factors and macroeconomic information to construct a test of the theory based on simulating investors’ effort to use the model in ‘real-time’ to forecast future monetary policy rates. The application of our approach to a monthly sample of US data from the eighties onward leads us to conclude that the deviation from the ET are very rarely significant and that fluctuations of risk premia are not large.
2006
Carriero A, Favero C., Kaminska I (2006). Financial factors, macroeconomic information and the Expectations Theory of the term structure of interest rates. JOURNAL OF ECONOMETRICS, 131, 339-358 [http://dx.doi.org/10.1016/j.jeconom.2005.01.019].
Carriero A; Favero C.; Kaminska I
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/715677
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