Macro Seminar: Martin Møller Andreasen, Aarhus University

Title: “Explaining Bond Return Predictability in an Estimated New Keynesian Model”

2019.08.29 | Charlotte Sparrevohn

Date Thu 28 Nov
Time 12:00 13:00
Location Fuglesangs Allé 4, 8210 Aarhus V, Building 2632(L), room 242

Speaker: Martin Møller Andreasen, Aarhus University

Title:  “Explaining Bond Return Predictability in an Estimated New Keynesian Model”

 

Abstract: This paper estimates a New Keynesian model with recursive preferences that explains key macro series, the ten-year nominal yield curve, and the ability of the spread between long- and short-term bond yields to predict future excess bond returns. The model also generates an upward sloping nominal and real yield curve, produces a positive inflation risk premium, and recovers the prediction by the expectations hypothesis of no return predictability when historical bond yields are risk-adjusted using term premia from the proposed model. Key to obtaining these results is a new specification of demand shocks with conditional heteroskedasticity.

Organisers: Bastian Schulz, W. Similan Rujiwattanapong and Giovanni Pellegrino

Macro Seminar Series