Hans DeWachter (Leuven)
Learning, macroeconomic dynamics and the term structure of interest rates: A structural econometric model
We develop a structural macroeconomic model that fits both the macroeconomic dynamics as well as the term structure of interest rates.
We extend the existing literature by introducing learning on the part of the private agents. Due to learning the affine representation of the term structure becomes time-varying. The model is estimated on US data.
We find that accounting for learning dynamics improves significantly the fit of the term structure relative to the standard rational expectations version of the model.
In association with the Tinbergen Institute.
- Franc Klaassen (AE)
- Maurice Bun (KE)
- Aljaz Ule (AE/CREED)
- Florian Wagener (KE/CeNDEF)