Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/219021
Authors: 
Schupp, Fabian
Year of Publication: 
2020
Series/Report no.: 
Bundesbank Discussion Paper 32/2020
Abstract: 
I propose a new term structure model for euro area real and nominal interest rates which explicitly incorporates a time-varying lower bound for nominal interest rates. Results suggest that the lower bound is of importance in structural analyses implying time-varying impulse responses of yield components. With short-term rate expectations at or close to the lower bound, premium components are less reactive to inflation shocks, while real rate responses change their sign from positive to negative. However, it is further shown that the lower bound is of only little relevance for decomposing yields into their expectations and premium components once survey information is incorporated. Overall, results support the conclusion that reaching the effective lower bound may change the way macroeconomic shocks propagate along the term structure of nominal as well as real interest rates.
Subjects: 
Joint real-nominal term structure modelling
lower bound
inflation expectations
inflation risk premium
survey information
yield curve decomposition
monetary policy
euro area
JEL: 
E31
E43
E44
E52
ISBN: 
978-3-95729-723-5
Document Type: 
Working Paper

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