Monetary Policy and the Yield Curve
SoFiE European Summer School
June 20-23 2023, Brussels, Belgium
This four-day summer school will cover empirical macro-finance research on monetary policy and the yield curve. The course starts with an overview of different approaches to model the behavior of monetary policy, the term structure of interest rates, and the interactions between the two. The emphasis is on no-arbitrage macro-finance models of the yield curve and issues related to their estimation, including the presence of the zero-lower bound on nominal interest rates. The course then covers three interrelated areas with empirical applications. First, the effects of monetary policy are studied using event studies and high-frequency changes in asset prices around policy announcements. This investigation includes questions related to monetary policy communication and unconventional monetary policies, such as large-scale asset purchases and forward guidance, as well as information effects. Second, risk premia in bond markets and their economic drivers are estimated using predictive models for bond returns. In this context, the spanning hypothesis, unspanned macro risks, and related econometric issues are explored. Finally, we discuss the role of long-run structural change and macroeconomic trends (such as r*, the equilibrium real interest rate) for monetary policy, the yield curve, and risk premia. Overall, the aim of the course is to give students a solid understanding of the key issues and methods of the research and policy analysis that examines the macro-monetary and term structure linkages.
Speakers
Glenn Rudebusch is a nonresident senior fellow at the Brookings Institution with the Hutchins Center on Fiscal & Monetary Policy and a senior fellow at New York University in the Volatility and Risk Institute of the Stern School of Business. Previously, Dr. Rudebusch spent several decades in Economic Research at the Federal Reserve Board and the Federal Reserve Bank of San Francisco, where he was most recently an Executive Vice President and Senior Policy Advisor. His research has been published American Economic Review, Journal of Political Economy, Journal of Monetary Economics, and Review of Finance
Michael D. Bauer is a Professor of Economics at Universität Hamburg, and a research fellow at CEPR, CESifo, and the IMFS. He is currently on leave from the Federal Reserve Bank of San Francisco.
Michael's research on macro-finance and climate finance has been published in leading economics and finance journals including the American Economic Review, the Economic Journal, and the Journal of Finance
How to participate?
To participate, please submit your application to Prof. Leonardo Iania at leonardo.iania@uclouvain.be by the 1st of April. The applications should include a CV and, in the text of the email, a brief motivation on why you would like to attending this course. Decisions will be emailed out by the 15th of April 2023. Participants interested in making a presentation should submit also submit the complete research paper that will form the basis of their presentation. Only 6 to 8 papers will be selected for presentation. Decisions will also be emailed out by 15th of April 2023.
Fees: 400 Euro for academics and 1000 Euro for non-academics. All accepted participants are expected to be members of the Society for Financial Econometrics or to join before their place is confirmed. Further info on how to join SoFiE is available at http://sofie.stern.nyu.edu/membership (where a student membership option is available). Fees cover the inscription costs, lunches and coffee breaks foreseen in the program.
Schedule
Tuesday
09:00 Registration
9:30-12:30 Monetary policy rules, gradualism, estimation of policy rules, time-varying rules; dynamic term structure models (DTSMs)
12:30-13:30 Lunch
13:30-16:30 Macro-finance DTSMs, estimation of DTSMs, bias correction, restrictions on risk prices. Zero lower bound models.
Wednsday
9:30-12:30 Event studies and high-frequency monetary policy surprises, effects of monetary policy on the yield curve, unconventional monetary policies: quantitative easing and forward guidance, information effects.
12:30-13:30 Lunch
13:30-17:00 Student presentations
1) Johannes Krämer (IMF)
2) Raul Guarini Riva (Kellogg)
3) Nabil Bouamara (UCLouvain)
4) De Carolis, Flavio (Maastricht U.)
Thursday
9:30-12:30 Bond risk premia and predicting bond returns, unspanned macro risks and spanning hypothesis, inference in predictive regressions, subjective risk premia.
12:30-13:30 Lunch
13:30-17:00 Student presentations
1) Bruno De Backer (NBB)
2) Liana Nersisyan (UCLouvain)
3) Julius Schoelkopf (Heidelberg U.)
4) Pavel Tretiakov (UCLouvain)
Friday
9:30-12:30 Macroeconomic trends and shifting endpoints, inflation trends, equilibrium real interest rate, interest rates under falling stars, the role of macro and interest rate trends for monetary policy. r* vs. rk – return on capital.
12:30-13:00 Goodbye drink
Selected References
Bauer and Rudebusch (2020), "Interest Rates under Falling Stars." American Economic Review.
Bauer and Rudebusch (2017), “Resolving the Spanning Puzzle in Macro-Finance Term Structure Models.” Review of Finance.
Bauer and Hamilton (2017). "Robust Bond Risk Premia." Review of Financial Studies.
Bauer and Rudebusch (2016), “Monetary Policy Expectations at the Zero Lower Bound.” Journal of Money, Credit, and Banking.
Venue
Auditorium of the National Bank of Belgium
Montagne aux Herbes Potagères, 61 1000 Brussels.
Sponsors
ModSimFIE
"Modelling and Simulation with applications in Finance, Insurance and Economics"
See: https://modsimfie.ugent.be/
ARC
Actions de Recherche Concertées (ARC) Project 18/23-089