TY  - JOUR
AU  - Piazzesi,Monika
AU  - Schneider,Martin
TI  - Equilibrium Yield Curves
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12609
PY  - 2006
Y2  - October 2006
UR  - http://www.nber.org/papers/w12609
L1  - http://www.nber.org/papers/w12609.pdf
N1  - Author contact info:
Monika Piazzesi
Department of Economics
Stanford University
579 Serra Mall
Stanford, CA 94305-6072
Tel: (650) 723-9289
E-Mail: piazzesi@stanford.edu

Martin Schneider
Department of Economics
Stanford University
579 Serra Mall
Stanford, CA 94305-6072
Tel: (650) 721 6320
E-Mail: schneidr@stanford.edu
M1  - published as Monika Piazzesi, Martin Schneider. "Equilibrium Yield Curves," in Daron Acemoglu, Kenneth Rogoff and Michael Woodford, editors, "NBER Macroeconomics Annual 2006, Volume 21" MIT Press (2007)

M3  - presented at "21st Annual Conference on Macroeconomics", April 7-8, 2006
AB  - This paper considers how the role of inflation as a leading business-cycle indicator affects the pricing of nominal bonds. We examine a representative agent asset pricing model with recursive utility preferences and exogenous consumption growth and inflation. We solve for yields under various assumptions on the evolution of investor beliefs. If inflation is bad news for consumption growth, the nominal yield curve slopes up. Moreover, the level of nominal interest rates and term spreads are high in times when inflation news are harder to interpret. This is relevant for periods such as the early 1980s, when the joint dynamics of inflation and growth was not well understood.
ER  -