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Gilchrist ortiz and zakrajsek 2009 use an index of

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Unformatted text preview: risky corporate bonds and on similar-maturity Treasury bonds is a commonly watched indicator of disturbances to the market for corporate debt, which is strongly correlated with variations in economic activity. Gilchrist, Ortiz, and Zakrajsek (2009) use an index of corporate bond spreads as a measure of the time-varying financial wedge in an estimated monetary dynamic stochastic general equilibrium model and find that the co-movements of the bond spreads with other aggregate variables are consistent with this interpretation. Financial Intermediation and Macroeconomic Analysis 37 Figure 5 The Federal Funds Rate Target and Some Interest-rate Spreads 6.0 Percentage points 5.0 FF target 10-year term premium Baa-Treasury spread LIBOR-OIS spread 4.0 3.0 2.0 1.0 0.0 2003 2004 2005 2006 2007 2008 2009 2010 Sources: The FF target is from the Federal Reserve Board; the 10-year term premium was calculated by Don H. Kim and Jonathan H. Wright (available at the Federal Reserve Board website); the Baa–Treasury spread is from the Federal Reserve Bank of St. Louis; the LIBOR-OIS spread is from Bloomberg. Notes: The “FF target” is the Feder...
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This note was uploaded on 11/23/2013 for the course ECON 11837649 taught by Professor Batchelder during the Spring '10 term at Pepperdine.

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