The Term Structure of Interest Rates in a DSGE Model with Recursive Preferences
NBER Working Paper No. 15890
We solve a dynamic stochastic general equilibrium (DSGE) model in which the representative household has Epstein and Zin recursive preferences. The parameters governing preferences and technology are estimated by means of maximum likelihood using macroeconomic data and asset prices, with a particular focus on the term structure of interest rates. We estimate a large risk aversion, an elasticity of intertemporal substitution higher than one, and substantial adjustment costs. Furthermore, we identify the tensions within the model by estimating it on subsets of these data. We conclude by pointing out potential extensions that might improve the model's fit.
Document Object Identifier (DOI): 10.3386/w15890
Published: van Binsbergen, Jules H. & FernÃ¡ndez-Villaverde, JesÃºs & Koijen, Ralph S.J. & Rubio-RamÃrez, Juan, 2012. "The term structure of interest rates in a DSGE model with recursive preferences," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 634-648.
Users who downloaded this paper also downloaded these: