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News and the Term Structure in General Equilibrium

46 Pages Posted: 19 Oct 2007  

Joshua Mark Davis

Pacific Investment Management Company (PIMCO); Northwestern University - Department of Economics

Date Written: October 2007

Abstract

This paper investigates the impact of agents' expectations about future fundamental economic disturbances (news) on macroeconomic dynamics. Several intuitive tests provide insight into the information content of the yield curve and its' ability to identify these 'news' disturbances. Bayesian estimation of a dynamic stochastic general equilibrium (DSGE) model using conventional macroeconomic aggregates and term structure data suggests that news shocks are important for understanding economic fluctuations.

Keywords: News, Interest Rates, Term Structure, Equilibrium, DSGE, Bayesian, Expectations Hypothesis

JEL Classification: C11, C13, C22, E22, E27, E32, E37, G12

Suggested Citation

Davis, Joshua Mark, News and the Term Structure in General Equilibrium (October 2007). Available at SSRN: https://ssrn.com/abstract=1022631 or http://dx.doi.org/10.2139/ssrn.1022631

Joshua Mark Davis (Contact Author)

Pacific Investment Management Company (PIMCO) ( email )

840 Newport Center Drive
Suite 100
Newport Beach, CA 92660
United States

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

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