The Role of Uncertainty in the Term Structure of Interest Rates: A Macro-Finance Perspective

Using a macroeconomic perspective, we examine the effect of uncertainty arising from policy-shock volatility on yield-curve dynamics. Many macro-finance models assume that policy shocks are homoskedastic, while observed policy shock processes are significantly time varying and persistent. We allow for this key feature by constructing a no-arbitrage GARCH affine term structure model, in which monetary policy uncertainty is modeled as the conditional volatility of the error term in a Taylor rule. We find that monetary policy uncertainty increases the medium- and longer-term spreads in a model that incorporates macroeconomic dynamics.

"The Role of Uncertainty in the Term Structure of Interest Rates: A Macro-Finance Perspective"

Using a macroeconomic perspective, we examine the effect of uncertainty arising from policy-shock volatility on yield-curve dynamics. Many macro-finance models assume that policy shocks are homoskedastic, while observed policy shock processes are significantly time varying and persistent. We allow for this key feature by constructing a no-arbitrage GARCH affine term structure model, in which monetary policy uncertainty is modeled as the conditional volatility of the error term in a Taylor rule. We find that monetary policy uncertainty increases the medium- and longer-term spreads in a model that incorporates macroeconomic dynamics.

The Role of Monetary Policy Uncertainty in the Term Structure of Interest Rates

We examine the effect of uncertainty arising from policy-shock volatility on yield-curve dynamics. In contrast to the assumption of many macro-finance models, policy-shock processes appear to be time varying and persistent. We allow for this heteroskedasticity by constructing a no-arbitrage GARCH affine term structure model, in which policy-shock volatility is defined as the conditional volatility of the error term in a Taylor rule. We find that an increase in monetary policy uncertainty raises the medium- and longer-term spreads in a model that incorporates macroeconomic dynamics.GARCH, Estimation, Term Structure of Interest Rates, Financial Markets and the Macro-economy, Monetary Policy

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Neural Correlates of Attitude Change Following Positive and Negative Advertisements

Understanding changes in attitudes towards others is critical to understanding human behaviour. Neuropolitical studies have found that the activation of emotion-related areas in the brain is linked to resilient political preferences, and neuroeconomic research has analysed the neural correlates of social preferences that favour or oppose consideration of intrinsic rewards. This study aims to identify the neural correlates in the prefrontal cortices of changes in political attitudes toward others that are linked to social cognition. Functional magnetic resonance imaging (fMRI) experiments have presented videos from previous electoral campaigns and television commercials for major cola brands and then used the subjects' self-rated affinity toward political candidates as behavioural indicators. After viewing negative campaign videos, subjects showing stronger fMRI activation in the dorsolateral prefrontal cortex lowered their ratings of the candidate they originally supported more than did those with smaller fMRI signal changes in the same region. Subjects showing stronger activation in the medial prefrontal cortex tended to increase their ratings more than did those with less activation. The same regions were not activated by viewing negative advertisements for cola. Correlations between the self-rated values and the neural signal changes underscore the metric representation of observed decisions (i.e., whether to support or not) in the brain. This indicates that neurometric analysis may contribute to the exploration of the neural correlates of daily social behaviour