The Term Structure of Interest Rates in a DSGE Model with Recursive Preferences / Jules van Binsbergen, Jesús Fernández-Villaverde, Ralph S.J. Koijen, Juan F. Rubio-Ramírez.

Format:

Book

Author/Creator:

van Binsbergen, Jules.

Contributor:

National Bureau of Economic Research.

Fernández-Villaverde, Jesús.

Koijen, Ralph S.J.

Rubio-Ramírez, Juan F.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15890.

NBER working paper series no. w15890

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

We solve a dynamic stochastic general equilibrium (DSGE) model in which the representative household has Epstein and Zin recursive preferences. The parameters governing preferences and technology are estimated by means of maximum likelihood using macroeconomic data and asset prices, with a particular focus on the term structure of interest rates. We estimate a large risk aversion, an elasticity of intertemporal substitution higher than one, and substantial adjustment costs. Furthermore, we identify the tensions within the model by estimating it on subsets of these data. We conclude by pointing out potential extensions that might improve the model's fit.

Notes:

Print version record

April 2010.