Dynamic Term Structure Models: The Best Way to Enforce the Zero Lower Bound in the United States

2015 ◽  
Author(s):  
Martin M. Andreasen ◽  
Andrew Meldrum
Keyword(s):  
United States ◽  
Lower Bound ◽  
Term Structure ◽  
The United States ◽  
Zero Lower Bound ◽  
Term Structure Models

scholarly journals A Shadow Rate or a Quadratic Policy Rule? The Best Way to Enforce the Zero Lower Bound in the United States

2018 ◽  
Vol 54 (5) ◽  
pp. 2261-2292 ◽  
Author(s):  
Martin M. Andreasen ◽  
Andrew Meldrum
Keyword(s):  
Lower Bound ◽  
Term Structure ◽  
The United States ◽  
Quadratic Term ◽  
Zero Lower Bound ◽  
Term Structure Model ◽  
Conditional Expectations ◽  
Pricing Factors ◽  
Quadratic Term Structure ◽  
Reasonable Description

We study whether it is better to enforce the zero lower bound (ZLB) in models of U.S. Treasury yields using a shadow rate model or a quadratic term structure model. We show that the models achieve a similar in-sample fit and perform comparably in matching conditional expectations of future yields. However, when the recent ZLB period is included in the sample, the models’ ability to match conditional expectations away from the ZLB deteriorates because the time-series dynamics of the pricing factors change. In addition, neither model provides a reasonable description of conditional volatilities when yields are away from the ZLB.

scholarly journals An Assessment of Estimates of Term Structure Models for the United States

2011 ◽  
Vol 11 (247) ◽  
pp. 1
Author(s):  
Carlos I. Medeiros ◽  
Ying He ◽  
◽  
Keyword(s):  
United States ◽  
Term Structure ◽  
The United States ◽  
Term Structure Models
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