Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208313
Authors: 
Amisano, Gianni
Tristani, Oreste
Year of Publication: 
2019
Series/Report no.: 
ECB Working Paper No. 2279
Abstract: 
We study the relationship between monetary policy and long-term rates in a structural, general equilibrium model estimated on both macro and yields data from the United States. Regime shifts in the conditional variance of productivity shocks, or "uncertainty shocks", are an important model ingredient. First, they account for countercyclical movements in risk premia. Second, they induce changes in the demand for precautionary saving, which affects expected future real rates. Through changes in both risk-premia and expected future real rates, uncertainty shocks account for about 1/2 of the variance of long-term nominal yields over long horizons. The remaining driver of long-term yields are changes in inflation expectations induced by conventional, autoregressive shocks. Long-term inflation expectations implied by our model are in line with those based on survey data over the 1980s and 1990s, but less strongly anchored in the 2000s.
Subjects: 
monetary policy rules
uncertainty shocks
term structure of interest rates
regime switches
Bayesian estimation
JEL: 
C11
C34
E40
E43
E52
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3541-8
Document Type: 
Working Paper

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