Golinski, Adam orcid.org/0000-0001-8603-1171 and Spencer, Peter orcid.org/0000-0002-5595-5360 (2024) Unconventional monetary policies and the yield curve:Estimating non-affine term structure models with unspanned macro risk by factor extraction. Review of Asset Pricing Studies. pp. 119-152. ISSN 2045-9920
Abstract
We show how the Joslin, Singleton, and Zhu (2011) factor extraction approach to estimating the Gaussian term structure model can be modified to handle the interest rate lower bound without the approximations used in other approaches. This drastically reduces the computation time and produces more robust estimates of the lower bound parameter and the shadow rate. It makes feasible the extensive specification search necessary to allow for unspanned factors as in Joslin, Priebsch, and Singleton (2014), allowing the term structure model to be used to better assess the effects of policy on the term premium and market expectations.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © The Author(s) 2023. |
Keywords: | Term structure,Shadow rate,No-arbitrage restrictions,Macro-finance model |
Dates: |
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Institution: | The University of York |
Academic Units: | The University of York > Faculty of Social Sciences (York) > Economics and Related Studies (York) |
Depositing User: | Pure (York) |
Date Deposited: | 17 May 2023 08:50 |
Last Modified: | 16 Oct 2024 19:12 |
Published Version: | https://doi.org/10.1093/rapstu/raad011 |
Status: | Published |
Refereed: | Yes |
Identification Number: | 10.1093/rapstu/raad011 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:199149 |
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Filename: raad011.pdf
Description: Unconventional Monetary Policies and the Yield Curve: Estimating Non-Affine Term Structure Models with Unspanned Macro Risk by Factor Extraction
Licence: CC-BY 2.5