TY  - JOUR
AU  - Diebold,Francis X.
AU  - Piazzesi,Monika
AU  - Rudebusch,Glenn
TI  - Modeling Bond Yields in Finance and Macroeconomics
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11089
PY  - 2005
Y2  - January 2005
UR  - http://www.nber.org/papers/w11089
L1  - http://www.nber.org/papers/w11089.pdf
N1  - Author contact info:
Francis X. Diebold
Department of Economics
University of Pennsylvania
3718 Locust Walk
Philadelphia, PA  19104-6297
Tel: 215/898-1507
Fax: 212/573-4217
E-Mail: fdiebold@sas.upenn.edu

Monika Piazzesi
Department of Economics
Stanford University
579 Serra Mall
Stanford, CA 94305-6072
Tel: (650) 723-9289
E-Mail: piazzesi@stanford.edu

Glenn Rudebusch
Federal Reserve Bank of San Francisco
Economic Research, MS 1130
101 Market Street
San Francisco, CA  94105-9967
Tel: 415-974-3173
E-Mail: glenn.rudebusch@sf.frb.org
AB  - From a macroeconomic perspective, the short-term interest rate is a policy instrument under the direct control of the central bank. From a finance perspective, long rates are risk-adjusted averages of expected future short rates. Thus, as illustrated by much recent research, a joint macro-finance modeling strategy will provide the most comprehensive understanding of the term structure of interest rates. We discuss various questions that arise in this research, and we also present a new examination of the relationship between two prominent dynamic, latent factor models in this literature: the Nelson-Siegel and affne no-arbitrage term structure models.
ER  -