scholarly journals News Shocks and the Slope of the Term Structure of Interest Rates: Reply

2017 ◽  
Vol 107 (10) ◽  
pp. 3250-3256 ◽  
Author(s):  
André Kurmann ◽  
Christopher Otrok
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
News Shocks ◽  
News Shock ◽  
Negative News

This reply to Cascaldi-Garcia's (2017) comment argues that by using the original code of Kurmann and Otrok (2013) with new data on utilization-adjusted TFP, Cascaldi-Garcia (2017) confounds positive and negative news shocks. With a small modification to the code—how a news shock is signed as positive—we obtain news shock responses consistent with Sims (2016) and Kurmann and Sims (2017) and largely reestablish the results of Kurmann and Otrok (2013). (JEL E23, E32, E43, E52, G12, G14)

scholarly journals News Shocks and the Slope of the Term Structure of Interest Rates: Comment

2017 ◽  
Vol 107 (10) ◽  
pp. 3243-3249 ◽  
Author(s):  
Danilo Cascaldi-Garcia
Keyword(s):  
Interest Rates ◽  
Total Factor Productivity ◽  
Term Structure ◽  
Productivity Growth ◽  
Economic Activity ◽  
Yield Curve ◽  
Factor Productivity ◽  
News Shocks

Kurmann and Otrok (2013) establish that the effects on economic activity from news on future productivity growth are similar to the effects from unexpected changes in the slope of the yield curve. This comment shows that these results become substantially weaker in the light of a recent update in the utilization-adjusted total factor productivity series produced by Fernald (2014). (JEL E23, E32, E43, E52, G12)

scholarly journals News Shocks and the Slope of the Term Structure of Interest Rates

2013 ◽  
Vol 103 (6) ◽  
pp. 2612-2632 ◽  
Author(s):  
André Kurmann ◽  
Christopher Otrok
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Statistical Approach ◽  
Structural Models ◽  
Impulse Response Functions ◽  
Response Functions ◽  
Factor Productivity ◽  
News Shocks ◽  
Macroeconomic Fundamentals ◽  
The Relationship

We adopt a statistical approach to identify the shocks that explain most of the fluctuations of the slope of the term structure of interest rates. We find that one shock can explain the majority of unpredictable movements in the slope. Impulse response functions lead us to interpret this shock as news about future total factor productivity (TFP). By showing that “slope shocks” are essentially “TFP news shocks” we provide a new explanation for the relationship between the slope and macroeconomic fundamentals. Our results also provide a new empirical benchmark for structural models at the intersection of macroeconomics and finance. (JEL E23, E43, E52, G12, G14)

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