Data and Code for: Interest Rates Under Falling Stars

Principal Investigator(s):  View help for Principal Investigator(s) Michael Bauer, Federal Reserve Bank of San Francisco; Glenn Rudebusch, Federal Reserve Bank of San Francisco

Version:  View help for Version V1

Name File Type Size Last Modified
  R 12/27/2019 05:07:PM
  data 12/27/2019 05:08:PM
master.R text/x-r-syntax 2.4 KB 12/27/2019 12:07:PM
readme.pdf application/pdf 126.4 KB 12/27/2019 12:07:PM
setup.R text/x-r-syntax 538 bytes 12/27/2019 12:07:PM

Project Citation: 

Bauer, Michael, and Rudebusch, Glenn. Data and Code for: Interest Rates Under Falling Stars. Nashville, TN: American Economic Association [publisher], 2020. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2020-04-15. https://doi.org/10.3886/E115622V1

Project Description

Summary:  View help for Summary Macro-finance theory implies that trend inflation and the equilibrium real interest rate are fundamental determinants of the yield curve. However, empirical models of the term structure of interest rates generally assume that these fundamentals are constant. We show that accounting for time variation in these underlying long-run trends is crucial for understanding the dynamics of Treasury yields and predicting excess bond returns. We introduce a new arbitrage-free model that captures the key role that long-run trends play for interest rates. The model also provides new, more plausible estimates of the term premium and accurate out-of-sample yield forecasts.

Scope of Project

Subject Terms:  View help for Subject Terms yield curve; macro-finance; inflation trend; equilibrium real interest rate; shifting endpoints; bond risk premia
JEL Classification:  View help for JEL Classification
      E43 Interest Rates: Determination, Term Structure, and Effects
      E44 Financial Markets and the Macroeconomy
      E47 Money and Interest Rates: Forecasting and Simulation: Models and Applications
Geographic Coverage:  View help for Geographic Coverage USA
Time Period(s):  View help for Time Period(s) 12/1971 – 3/2018 (1971:Q4 to 2018:Q1)


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V1 [2020-04-15]

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