Skip to main content

Macro-Finance Essays on the Term Structure of Interest Rates

Morell, Joseph (2017) Macro-Finance Essays on the Term Structure of Interest Rates. Doctor of Philosophy (PhD) thesis, University of Kent,. (KAR id:67200)

Language: English
Download (1MB) Preview
[thumbnail of 246Thesis.pdf]
This file may not be suitable for users of assistive technology.
Request an accessible format


This thesis contributes to the literature that analyses the term structure of interest rates from a macro-finance perspective.

Chapter 2 examines the importance of shifts in the expectations of agents in the form of "news shocks" in explaining the variation in the slope of the term structure of interest rates. The methodology employed in this chapter is a medium-scale Dynamic Stochastic General Equilibrium model that has been augmented to permit a role for both anticipated and unanticipated components in the usual array of structural shocks. In order to quantify the relative importance of each structural shock, the model is estimated via Bayesian methods on US data. We find the anticipated Total Factor Productivity shock to be quantitatively unimportant in driving US term spread fluctuations since, conditional on this shock, our model is unable to generate the observed leading procyclical movement of the spread found in the data. We do, however, find a limited role for the anticipated wage mark-up shock in that it accounts for a small share of the variation in consumption, hours and real wages.

The third and final chapter of this thesis examines the ability of the industry-standard Dynamic Stochastic General Equilibrium model to jointly explain both macroeconomic and financial data. We compute a second-order solution to our model in order to derive predic- tions for risk premia on equities and real, nominal and corporate bonds. Our central result is that by appending the Smets and Wouters (2007) model with Epstein-Zin preferences, long-run nominal risk and a credit market friction, we are able to generate realistic moments for the financial series under consideration without distorting the fit of our business cycle statistics.

Item Type: Thesis (Doctor of Philosophy (PhD))
Uncontrolled keywords: Macro-finance, DSGE, term structure, asset pricing
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
SWORD Depositor: System Moodle
Depositing User: System Moodle
Date Deposited: 05 Jun 2018 08:10 UTC
Last Modified: 16 Feb 2021 13:55 UTC
Resource URI: (The current URI for this page, for reference purposes)
  • Depositors only (login required):