Macroeconomic Implications of Changes in the Term Premium

Download or read book Macroeconomic Implications of Changes in the Term Premium written by Glenn D. Rudebusch and published by . This book was released on 2007 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Linearized New Keynesian models and empirical no-arbitrage macro-finance models offer little insight regarding the implications of changes in bond term premiums for economic activity. We investigate these implications using both a structural model and a reduced-form framework. We show that there is no structural relationship running from the term premium to economic activity, but a reduced-form empirical analysis does suggest that a decline in the term premium has typically been associated with stimulus to real economic activity, which contradicts earlier results in the literature.