A0444
Title: Estimating the interest rate trend in a shadow rate term structure model
Authors: Jun Ma - Northeastern University (United States) [presenting]
Yang Han - University of International Business and Economics (China)
Abstract: A shadow rate no-arbitrage dynamic term structure model with drifting trends is proposed to estimate the long-run trend of real interest rates using data from the U.S., the U.K., and Germany from January 1972 to April/March 2022. The interest rate trends of all three countries have declined since the 1990s, and there is strong co-movement among them. It is documented evidence that this model can provide better yield forecasts than existing models. The term premium estimates of the model are stationary and are positively correlated with inflation uncertainty measures.
