New Keynesian macroeconomics and the term structure

Geert Bekaert, Seonghoon Cho, Antonio Moreno

Research output: Contribution to journalArticle

68 Citations (Scopus)

Abstract

This article complements the structural New Keynesian macro framework with a no-arbitrage affine term structure model. Whereas our methodology is general, we focus on an extended macro model with unobservable processes for the inflation target and the natural rate of output that are filtered from macro and term structure data. We find that term structure information helps generate large and significant parameters governing the monetary policy transmission mechanism. Our model also delivers strong contemporaneous responses of the entire term structure to various macroeconomic shocks. The inflation target shock dominates the variation in the "level factor" whereas monetary policy shocks dominate the variation in the "slope and curvature factors."

Original languageEnglish
Pages (from-to)33-62
Number of pages30
JournalJournal of Money, Credit and Banking
Volume42
Issue number1
DOIs
Publication statusPublished - 2010 Feb 1

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New Keynesian
Macroeconomics
Term structure
Factors
Inflation target
Methodology
No-arbitrage
Natural rate
Affine term structure models
Monetary policy transmission mechanism
Monetary policy shocks
Curvature
Macroeconomic shocks
Macro model

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Bekaert, Geert ; Cho, Seonghoon ; Moreno, Antonio. / New Keynesian macroeconomics and the term structure. In: Journal of Money, Credit and Banking. 2010 ; Vol. 42, No. 1. pp. 33-62.
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New Keynesian macroeconomics and the term structure. / Bekaert, Geert; Cho, Seonghoon; Moreno, Antonio.

In: Journal of Money, Credit and Banking, Vol. 42, No. 1, 01.02.2010, p. 33-62.

Research output: Contribution to journalArticle

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