Yield Curve and the Macroeconomy: Evidence from a DSGE Model with Housing
SSRN, ISSN: 1556-5068
2020
- 1Citations
- 1,141Usage
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Example: if you select the 1-year option for an article published in 2019 and a metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019. If you select the 3-year option for the same article published in 2019 and the metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019, 2018 and 2017.
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Article Description
The slope of the yield curve has long been found to be a useful predictor of future economic activity, but the relationship is unstable. One change we have identified in this paper is that, starting from the 1990s, movements at the long end of the yield curve have an increase in predictive power. We use a medium-scale DSGE model with a housing sector and a yield curve as a guide to find out the sources of such change. The model implies that an increase in the short-term interest rate and a decrease in the long-term interest rate have different impacts on the economy, and to use the slope as a predictor one needs to distinguish movements at the two ends of the yield curve. Based on simulated data from the model, we find that nominal wage rigidities and the capital adjustment costs are closely related to the predictive power of the yield curve. This result is further confirmed with actual data.
Bibliographic Details
http://www.scopus.com/inward/record.url?partnerID=HzOxMe3b&scp=85112076464&origin=inward; http://dx.doi.org/10.2139/ssrn.3659679; https://www.ssrn.com/abstract=3659679; https://dx.doi.org/10.2139/ssrn.3659679; https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3659679; https://ssrn.com/abstract=3659679
Elsevier BV
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