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Glenn Rudebusch, FRB San Francisco Print
Wednesday, 24 May 2017, 16:30 - 18:00

Joint with NBB, KULeuven, UA, UCL, UGent, ULB, ULg, UMons, UNamur, USaint-Louis, Vlerick and VUB

Glenn Rudebusch, Federal Reserve Bank of San Francisco

Interest Rates under Falling Stars

Abstract:  No-arbitrage theory predicts that the equilibrium real interest rate, r*, and the perceived trend in inflation, pi*, are key determinants of the term structure of interest rates. While existing term structure analyses generally assume that these endpoints are constant, we show that accounting for fluctuations in both r* and pi* is crucial for understanding the dynamics of U.S. Treasury yields and risk pricing. Specifically, our empirical evidence reveals that time variation in r* and pi* captures the persistent movements in long-term interest rates, substantially improves long-range interest rate forecasts, predicts excess bond returns, and accounts for a substantial share of interest rate variability at low frequencies.

Location: NBB-Room A, Entrance: Warmoesberg 61, 1000 Brussels
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Please reply by email to if you wish to participate to this seminar or if you want to have an appointment with the speaker.