E43 - Interest Rates: Determination, Term Structure, and Effects

• International House Price Cycles, Monetary Policy and Risk Premiums

  Staff Working Paper 2014-54 Gregory Bauer

  Using a panel logit framework, the paper provides an estimate of the likelihood of a house price correction in 18 OECD countries. The analysis shows that a simple measure of the degree of house price overvaluation contains a lot of information about subsequent price reversals.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Housing JEL Code(s): C, C2, E, E4, E43, R, R2, R21

• The Neutral Rate of Interest in Canada

  Staff Discussion Paper 2014-5 Rhys R. Mendes

  A measure of the neutral policy interest rate can be used to gauge the stance of monetary policy. We define the neutral rate as the real policy rate consistent with output at its potential level and inflation equal to target after the effects of all cyclical shocks have dissipated.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Interest rates, Monetary policy transmission JEL Code(s): E, E4, E40, E42, E43, E5, E50, E52, E58

• Bond Risk Premia and Gaussian Term Structure Models

  Staff Working Paper 2014-13 Bruno Feunou, Jean-Sébastien Fontaine

  Cochrane and Piazzesi (2005) show that (i) lagged forward rates improve the predictability of annual bond returns, adding to current forward rates, and that (ii) a Markovian model for monthly forward rates cannot generate the pattern of predictability in annual returns.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Interest rates JEL Code(s): E, E4, E43, E47, G, G1, G12

• Household Risk Management and Actual Mortgage Choice in the Euro Area

  Staff Working Paper 2014-1 Michael Ehrmann, Michael Ziegelmeyer

  Mortgages constitute the largest part of household debt. An essential choice when taking out a mortgage is between fixed-interest-rate mortgages (FRMs) and adjustable-interest-rate mortgages (ARMs). However, so far, no comprehensive cross‐country study has analyzed what determines household demand for mortgage types, a task that this paper takes up using new data for the euro area.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Monetary policy transmission JEL Code(s): D, D1, D12, E, E4, E43, E5, E52, G, G2, G21