We build a model for bond yields based on a small-scale representation of an economy with secular declines in inflation, the real rate and output growth. Long-run restrictions identify nominal shocks that influence long-run inflation but do not influence the long-run real rate or output growth....

We greatly expand the space of tractable term-structure models. We consider one example that combines positive yields with rich volatility and correlation dynamics. Bond prices are expressed in closed form and estimation is straightforward. We find that the early stages of a recession have...

We provide a novel daily decomposition of the real exchange rate that exploits a direct link between bond and foreign exchange (FX) markets. Real exchange rate dynamics can be attributed to changes in the expected future level of the exchange rate; cross-country differentials of expected...