Macroeconomic Models and the Yield Curve: An assessment of the Fit

Chadha, Jagjit S. and Holly, Sean (2006) Macroeconomic Models and the Yield Curve: An assessment of the Fit. Journal of Economics Dynamics and Control, . (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

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http://econpapers.repec.org/paper/camcamdae/0640.h...

Abstract

Many have questioned the empirical relevance of the Calvo-Yun model. This paper appends three widely-studied macroeconomic models (Calvo-Yun, Hybrid and Svensson) with forward rate curves. We back out from observations on the yield curve the underlying macroeconomic model that most closely matches the level, slope and curvature of the yield curve. With each model we trace the response of the yield curve to macroeconomic shocks. We assess the fit of each model with the observed behaviour in forward rates. We find limited support for Calvo-Yun model in terms of fit with the observed yield curve but we find some support for each of the Hybrid and Svensson models. We conclude that macroeconomic persistence seems to be priced into the yield curve.

Item Type: Article
Uncontrolled keywords: Macromodels; Yield Curve; Persistence
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: Jagjit Chadha
Date Deposited: 16 Sep 2008 20:19
Last Modified: 09 Mar 2016 16:49
Resource URI: https://kar.kent.ac.uk/id/eprint/11230 (The current URI for this page, for reference purposes)
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