(Un)Expected Monetary Policy Shocks and Term Premia

59 Pages Posted: 5 Nov 2017

See all articles by Martin Kliem

Martin Kliem

Deutsche Bundesbank - Research Centre

Alexander Meyer-Gohde

affiliation not provided to SSRN

Date Written: 2017

Abstract

We analyze an estimated stochastic general equilibrium model that replicates key macroeconomic and financial stylized facts during the Great Moderation of 1983-2007. Our model predicts a sizeable and volatile nominal term premium - comparable to recent reduced-form empirical estimates - with real risk two times more important than inflation risk. The model enables us to address salient questions about the effects of monetary policy on the term structure of interest rates. We find that monetary policy can have sizeable and differing effects on nominal and real risk premia, rationalizing many opposing findings in the empirical literature.

Keywords: DSGE model, Bayesian estimation, Term structure, Monetary policy

JEL Classification: E13, E31, E43, E44, E52

Suggested Citation

Kliem, Martin and Meyer-Gohde, Alexander, (Un)Expected Monetary Policy Shocks and Term Premia (2017). Bundesbank Discussion Paper No. 30/2017. Available at SSRN: https://ssrn.com/abstract=3065180

Martin Kliem (Contact Author)

Deutsche Bundesbank - Research Centre ( email )

Wilhelm-Epstein-Str. 14
D-60431 Frankfurt/Main
Germany

Alexander Meyer-Gohde

affiliation not provided to SSRN

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