TY - JOUR
T1 - Term premia and inflation uncertainty
T2 - Empirical evidence from an international panel dataset: Comment
AU - Bauer, Michael D.
AU - Rudebusch, Glenn D.
AU - Wu, Jing Cynthia
PY - 2014/1
Y1 - 2014/1
N2 - Term premia implied by maximum likelihood estimates of affine term structure models are misleading because of small-sample bias. We show that accounting for this bias alters the conclusions about the trend, cycle, and macroeconomic determinants of the term premia estimated in Wright (2011). His term premium estimates are essentially acyclical, and often just parallel the secular trend in longterm interest rates. In contrast, bias-corrected term premia show pronounced countercyclical behavior, consistent with theoretical and empirical arguments about movements in risk premia.
AB - Term premia implied by maximum likelihood estimates of affine term structure models are misleading because of small-sample bias. We show that accounting for this bias alters the conclusions about the trend, cycle, and macroeconomic determinants of the term premia estimated in Wright (2011). His term premium estimates are essentially acyclical, and often just parallel the secular trend in longterm interest rates. In contrast, bias-corrected term premia show pronounced countercyclical behavior, consistent with theoretical and empirical arguments about movements in risk premia.
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U2 - 10.1257/aer.104.1.323
DO - 10.1257/aer.104.1.323
M3 - Review article
AN - SCOPUS:84892620398
SN - 0002-8282
VL - 104
SP - 323
EP - 337
JO - American Economic Review
JF - American Economic Review
IS - 1
ER -