Reconciling the term structure of interest rates with the consumption-based ICAP model

Article Abstract:

An intertemporal asset pricing model that is based on consumption is analyzed to determine whether modifications of the model can lead to interest-rate term structures that are aligned with empirical evidence from the US. The reproducibility of the model, which is modified to permit time variation in exogenous process variances, is also evaluated through Monte Carlo simulation. Results show that simulated spreads and yields exhibit term structures that are similar to the actual observed structure of US Treasury bills during the 1964-88 period.

Research, Interest rates, Simulation methods, Simulation, Heteroscedasticity

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Modelling and forecasting exchange rates with a Bayesian time-varying coefficient model

Article Abstract:

An analysis of foreign exchange rates is presented. The analysis considers a multivariate Bayesian time-varying coefficients (TVC) technique for examining exchange rate data. Results show that an application of TVC as data generating mechanism generates nonlinear conditional moments and leptokurtosis in unconditional series distribution. In addition, time aggregation reduces leptokurtic behavior.

Methods, Prices and rates, Bayesian statistical decision theory, Bayesian analysis, Foreign exchange, Foreign exchange rates, Forecasting

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International business cycles, financial markets and household production

Article Abstract:

An international real business cycle model with disturbances to both market and household technologies represents the major regularities of the data. The models also enhance existing models in matching international consumption, investment, and output correlations without irrealistic expectations on the structure of international financial markets.

Commercial Banks, Commercial Banking, Business Financing, Financial Management, Analysis, Management, Financial markets, Business cycles

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