Using arbitrage-free affine models, we analyze the dynamics of German bond yields and risk premia for the period 1999 to 2010 (EMU). We estimate two model specifications, one with only latent factors, and another one with a Taylor-type rule comprising a price and a real activity factor drawn...

A joint model of macroeconomic and term structure dynamics is specified and estimated for the euro area. The model comprises a backward-looking Phillips curve, a dynamic IS equation, a monetary policy rule as well as a specification of the dynamics of trend growth and the natural real interest...

The paper develops an empirical no-arbitrage Gaussian affine term structure model to explain the dynamics of the German term structure of interest rates from 1979 through 1998. In contrast to most affine term structure models two risk factors that drive the dynamics are linked to observable...