Learning and the Role of Macroeconomic Factors in the Term Structure of Interest Rates

@inproceedings{Laubach2007LearningAT,
title={Learning and the Role of Macroeconomic Factors in the Term Structure of Interest Rates},
author={Thomas Laubach and Robert J. Tetlow and John C. Williams},
year={2007}
}

Models of the term structure based on only observable variables have had limited success in explaining movements in longer-term interest rates. A key assumption in much of this literature is that agents know all the parameters describing the model of the economy and that these parameters are fixed for all time. In this paper, we relax both of these assumptions and assume that agents regularly re-estimate the parameters of their models–both those determining the point forecasts and those… CONTINUE READING