FSE project 2014-17

Explaining the macro-economic foundation behind long-term nominal interest rates and their effects on the real economy

The recent financial crisis has highlighted the importance of credit and how short- and long-term loans may affect economic activity. These issues will be explored in the proposed research project consisting of four subprojects. The first subproject will improve structural macro-finance models’ ability to match long-term interest rates by incorporating model uncertainty. The second subproject will estimate a non-structural model to obtain stylized facts on how the real economy is affected by changes in long-term interest rates. The third subproject will explore mechanisms whereby changes in long-term interest rates may affect the real economy. In the final subproject, we will analyze how demand and supply effects for bonds may be modeled and how bond buying programs by a central bank may affect the real economy.

Full project description



Martin Møller Andreasen

Martin Møller Andreasen is the Prinicipal Investigator on the project. Martin earned his MSc in Economics and Management in 2005, and in 2009 he was awarded his PhD in Macro-Finance from Aarhus University. For a while, he worked as a PhD Economist with the Bank of England. Since August 2012, he has been Associate Professor at the Department of Economics and Business.

From 1 January 2012 to 1 January 2014, he has published or had five articles accepted for publication in high-quality internationally recognised journals. He conducts research within the field of social science with particular emphasis on the financial markets. One of the goals of his research is to understand how the macro economy affects the pricing of bonds, how it affects bank lending to companies and so on. This understanding may be of considerable importance to individual companies, not least in the light of the recession.


Juan Carlos Parra Alvarez


Juan Carlos Parra Alvarez is working as a postdoc on the project. Juan Carlos obtained a PhD in Economics from Aarhus University and CREATES in 2015. He holds an MA in Economics from Universidad de los Andes (Colombia), 2010, and a BA in economics from Universidad Eafit (Colombia), 2007. Juan Carlos has also worked at the Central Bank of Colombia where he was a member of the macroeconomic modeling department. During 2013, Juan Carlos visited the Department of Economics at University of Pennsylvania and completed a PhD internship at the Research Unit of Norges Bank (Central Bank of Norway).

His main research interests are monetary policy, macroeconometrics and macrofinance, with particular focus on the solution, estimation and statistical evaluation of DSGE models both in discrete and continuous time.


Completed working papers:

  • Andreasen, Martin M., Jesús Fernández-Villaverde and Juan F. Rubio-Ramírez (2017): "The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications", Review of Economic Studies (forthcoming). Paper and Online Appendix. Third-order GMM estimation package for DSGE models.
  • Andreasen, Martin M. and Kasper Jørgensen: "The Importance of Timing Attitudes in Consumption-Based Asset Pricing Models". Paper and Online appendix.
  • Andreasen, Martin M., Tom Engsted, Stig Møller and Magnus Sander: "Bond Market Asymmetries across Recessions and Expansions: New Evidence on Risk Premia". Paper and  Online Appendix.

Work in progress:

  • Alvarez, Juan Carlos Parra and Martin M. Andreasen: "Stylized facts on the interaction between the real economy and bond markets"

Other activities:

  • Seminar presentation at St. Andrews, Scotland (February 9, 2017)
  • Seminar presentation at Uppsala University, Sweden (November 16, 2016)
  • Seminar presentation at Hamburg University, Germany (April 16, 2016)
  • Seminar presentation at CORE in Louvain-la-Neuve, Belgium (February 12, 2016)
  • 9th International Conference on Computational and Financial Econometrics, London, UK. Organized the session on “Numerical methods and estimation of DSGE models” (December 12-14, 2015).
  • Seminar presentation at University of California, Irvine (March 4, 2915)
  • Internal lunch seminar at San Francisco Federal Reserve Bank, US (October 16, 2014).
  • From the 10th of August 2014 until late March 2015, Martin visited the San Fransisco FED: http://www.frbsf.org/