Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098324 | Journal of Economic Dynamics and Control | 2015 | 10 Pages |
Abstract
The term premium has become increasingly important in discussions of monetary policy formulation. This paper reviews two approaches to embedding a variable term premium into an otherwise standard modern DSGE model. The first approach maintains frictionless asset trade but alters preferences so that agents are more averse to the risk in long bonds. The second approach uses traditional preferences, but segments asset trade between long and short bonds. Policy issues are also discussed.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Timothy S. Fuerst,