Macroeconomics and the term structure

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dc.citation.epage367en_US
dc.citation.issueNumber2en_US
dc.citation.spage331en_US
dc.citation.volumeNumber50en_US
dc.contributor.authorGürkaynak, R. S.en_US
dc.contributor.authorWright, J. H.en_US
dc.date.accessioned2018-04-12T13:52:40Z
dc.date.available2018-04-12T13:52:40Z
dc.date.issued2012en_US
dc.departmentDepartment of Economicsen_US
dc.description.abstractThis paper provides an overview of the analysis of the term structure of interest rates with a special emphasis on recent developments at the intersection of macroeconomics and finance. The topic is important to investors and also to policymakers, who wish to extract macroeconomic expectations from longer-term interest rates, and take actions to influence those rates. The simplest model of the term structure is the expectations hypothesis, which posits that long-term interest rates are expectations of future average short-term rates. In this paper, we show that many features of the configuration of interest rates are puzzling from the perspective of the expectations hypothesis. We review models that explain these anomalies using time-varying risk premia. Although the quest for the fundamental macroeconomic explanations of these risk premia is ongoing, inflation uncertainty seems to play a large role. Finally, while modern finance theory prices bonds and other assets in a single unified framework, we also consider an earlier approach based on segmented markets. Market segmentation seems important to understand the term structure of interest rates during the recent financial crisis.en_US
dc.identifier.doi10.1257/jel.50.2.331en_US
dc.identifier.issn0022-0515
dc.identifier.urihttp://hdl.handle.net/11693/38306
dc.language.isoEnglishen_US
dc.publisherAmerican Economic Associationen_US
dc.relation.isversionofhttp://dx.doi.org/10.1257/jel.50.2.331en_US
dc.source.titleJournal of Economic Literatureen_US
dc.subjectTerm structureen_US
dc.subjectInterest ratesen_US
dc.subjectExpectations hypothesisen_US
dc.subjectAffine modelsen_US
dc.subjectInflationen_US
dc.subjectFinancial crisisen_US
dc.subjectSegmented marketsen_US
dc.titleMacroeconomics and the term structureen_US
dc.typeArticleen_US
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