The Federal Reserve Board eagle logo links to home page
Finance and Economics Discussion Series
Finance and Economics Discussion Series logo links to FEDS home page Monetary Policy and the Yield Curve
Antulio N. Bomfim

Abstract: This paper examines the empirical properties of a two-factor affine model of the term structure of interest rates, estimated with LIBOR and interest rate swap data from 1989 through 2001. Despite its relative simplicity, the model fits the interest rate data remarkably well, both across time and maturity, and identifies changes in the current and expected stance of monetary policy as primary movers of the yield curve.

Keywords: Affine models, expectations hypothesis, latent factors

Full paper (363 KB PDF)

Home | FEDS | List of 2003 FEDS papers
To comment on this site, please fill out our feedback form.
Last update: May 2, 2003