New-Keynesian Macroeconomics and the Term Structure

62 Pages Posted: 16 Jun 2005 Last revised: 28 Jun 2010

See all articles by Geert Bekaert

Geert Bekaert

Columbia Business School - Finance and Economics

Seonghoon Cho

School of Economics, Yonsei University

Antonio Moreno

School of Economics and Business, University of Navarra

Multiple version iconThere are 4 versions of this paper

Date Written: May 2005

Abstract

This article complements the structural New-Keynesian macro framework with a no-arbitrage affine term structure model. Whereas our methodology is general, we focus on an extended macro-model with an unobservable time-varying inflation target and the natural rate of output which are filtered from macro and term structure data. We obtain large and significant estimates of the Phillips curve and real interest rate response parameters. Our model also delivers strong contemporaneous responses of the entire term structure to various macroeconomic shocks. The inflation target dominates the variation in the "level factor" whereas the monetary policy shocks dominate the variation in the "slope and curvature factors".

Suggested Citation

Bekaert, Geert and Cho, Seonghoon and Moreno, Antonio, New-Keynesian Macroeconomics and the Term Structure (May 2005). NBER Working Paper No. w11340. Available at SSRN: https://ssrn.com/abstract=723309

Geert Bekaert (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Seonghoon Cho

School of Economics, Yonsei University ( email )

Yonsei University
Seoul
Korea
82-2-2123-2470 (Phone)
82-2-393-1158 (Fax)

HOME PAGE: http://web.yonsei.ac.kr/sc719/index.htm

Antonio Moreno

School of Economics and Business, University of Navarra ( email )

Ed. Amigos
Pamplona, Navarra 31009
Spain

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