English, Article, Journal or magazine article edition: The bond premium in a DSGE model with long-run real and nominal risks Glenn D. Rudebusch; Eric T. Swanson

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Bookmark: http://trove.nla.gov.au/version/18046
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • The bond premium in a DSGE model with long-run real and nominal risks
Author
  • Glenn D. Rudebusch
  • Eric T. Swanson
Physical Description
  • preprint
Notes
  • The term premium on nominal long-term bonds in the standard dynamic stochastic general equilibrium (DSGE) model used in macroeconomics is far too small and stable relative to empirical measures obtained from the data - an example of the "bond premium puzzle." However, in models of endowment economies, researchers have been able to generate reasonable term premiums by assuming that investors face long-run economic risks and have recursive Epstein-Zin preferences. We show that introducing these two elements into a canonical DSGE model can also produce a large and variable term premium without compromising the model's ability to fit key macroeconomic variables.
  • RePEc:nbb:reswpp:200810-18
Language
  • English
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