Developments in Macro-Finance Yield Curve Modelling

Jagjit S. Chadha is Professor of Economics at the University of Kent and is on the Advisory Board of the Centre of International Macroeconomics and Finance at the University of Cambridge. His research involves incorporating financial factors in macroeconomic models and he has acted as an advisor to many central banks throughout the world. Alain C. J. Durré is Principal Economist in the Financial Research Division of the Directorate General Research of the European Central Bank and is Associate Professor of Finance at IÉSEG-School of Management at Lille Catholic University. He is also a member of the Centre National de la Recherche Scientifique (LEM-CNRS) in France and acts on occasion as Monetary Policy Advisor for the International Monetary Fund. He has published various papers on monetary and financial economics in many leading academic journals. Michael A. S. Joyce is an Adviser in the Macro Financial Analysis Division of the Bank of England and has over twenty years experience working at the Bank of England in various economics roles. His recent work has focused on modelling the term structure of interest rates and on analysing the effects of the UK's quantitative easing policy. Lucio Sarno is a Professor of Finance, Deputy Dean and Head of the Finance Faculty at Cass Business School, City University, London. His main research interests are in international finance, and he is a leading expert on exchange rates, a subject on which he writes prolifically and on which he is routinely called for advice by governments, international organizations and financial companies around the world.

• Foreword Paul Tucker; Preface; 1. Editors' introductory chapter and overview J. S. Chadha, Alain C. J. Durré, M. A. S. Joyce and L. Sarno; Part I. Keynote Addresses: 2. Is the long-term interest rate a policy victim, a policy variable or a policy lodestar? Philip Turner; 3. Sovereign debt and monetary policy in the euro area Alain C. J. Durré and Frank Smets; 4. The Federal Reserve's response to the financial crisis: what it did and what it should have done Daniel L. Thornton; 5. Tail risks and contract design from a financial stability perspective Patrik Edsparr and Paul Fisher; Part II. New Techniques: 6. Compound autoregressive processes and defaultable bond pricing Alain Monfort and Jean-Paul Renne; 7. Yield curve dimensionality when short rates are near the zero lower bound James M. Steeley; 8. The intelligible factor model: international comparison and stylized facts Yvan Lengwiler and Carlos Lenz; 9. Estimating the policy rule from money market rates when target rate changes are lumpy Jean-Sébastien Fontaine; 10. Developing a practical yield curve model: an odyssey M. A. H. Dempster, Jack Evans and Elena Medova; Part III. Policy: 11. The repo and federal funds markets before, during, and emerging from the financial crisis Morten Bech, Elizabeth Klee and Viktors Stebunovs; 12. Taylor rule uncertainty: believe it or not Andrea Buraschi, Andrea Carnelli and Paul Whelan; Part IV. Estimating Inflation Risk: 13. Inflation compensation and inflation risk premia in the euro area term structure of interest rates Juan Angel Garcia and Thomas Werner; 14. The predictive content of the yield curve for inflation Hans Dewachter, Leonardo Iania and Marco Lyrio; 15. Inflation risk premium and the term structure of macroeconomic announcements in the euro area and the United States Marcello Pericoli; Part V. Default Risk: 16. A term structure model for defaultable European sovereign bonds Priscilla Burity, Marcelo Medeiros and Luciano Vereda; 17. Some considerations on debt and interest rates Luigi Marattin, Paolo Paesani and Simone Salotti; Index.

'The term structure of interest rates has always been at the nexus of monetary policy, macroeconomics and finance. The historic lows in policy interest rates since the onset of the crisis have exposed gaps in earlier models of the term structure, leading to new promising research that significantly enhances our understanding. This volume collects state of the art research on the term structure from the academic and policy communities, making it indispensable for both practitioners and policymakers who seek to deepen their knowledge of macro-finance during these challenging times.' Athanasios Orphanides, MIT Sloan School of Management