A Preferred-Habitat Model of the Term Structure of Interest Rates
---- Acknowledgements ----
We thank Markus Brunnermeier, Andrea Buraschi, Pierre Collin-Dufresne, Peter DeMarzo, Giorgio Fossi, Ken Garbade, Robin Greenwood, Moyeen Islam, Arvind Krishnamurthy, Jun Liu, Vasant Naik, Anna Pavlova, Jeremy Stein, seminar participants at the Bank of England, Chicago Fed, ECB, LSE, Manchester, New York Fed, Tilburg, Toulouse, UCLA, and participants at the American Finance Association 2008, Adam Smith Asset Pricing 2007, Brazilian Finance Association 2008, Chicago 2008, CRETE 2008, Gerzensee 2007, Imperial 2007, NBER Asset Pricing 2007, and SITE 2006 conferences for helpful comments. We have especially benefited from an extensive set of insightful comments by John Cochrane, and from a communication by Xavier Gabaix on linearity-generating processes. Financial support from the Paul Woolley Centre at the LSE is gratefully acknowledged. The views expressed in this paper are those of the authors and not of Bank of America Merrill Lynch, any of its affiliates, or the National Bureau of Economic Research.