Equilibrium yield curves
By: Monika Piazzesi, Martin Schneider
Contributors: Schneider, Martin (Professor of economics); National Bureau of Economic Research
Series: NBER working paper series -- working paper 12609; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 12609.
Publisher: National Bureau of Economic Research
Published: 2006
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] /
Description: "This paper considers how the role of inflation as a leading business-cycle indicator affects the pricing of nominal bonds.  We examine a representative agent asset pricing model with recursive utility preferences and exogenous consumption growth and inflation.  We solve for yields under various assumptions on the evolution of investor beliefs.  If inflation is bad news for consumption growth, the nominal yield curve slopes up.  Moreover, the level of nominal interest rates and term spreads are high in times when inflation news are harder to interpret.  This is relevant for periods such as the early 1980s, when the joint dynamics of inflation and growth was not well understood"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 12/8/2006.

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