Although China’s monetary and financial system differs drastically from its Western counterpart, empirical studies covering this vast economy have often been simple reestimations or recalibrations of models originally designed to describe US or European monetary policy. In this paper, we aim to assess Chinese monetary policy and, in particular, monetary policy transmission through yield curves into the real economy. Our study takes into account the peculiarities of the Chinese economy: Namely, our model includes both China’s modern attempts at a market-based monetary policy as well as the “authority-based” one that is a relic of the original banking system. Besides, it considers the special nature of the Chinese treasury bond market, which is separated into two independent ones with very limited direct arbitrage opportunities between almost identical assets. Finally, it incorporates the role of real estate, which played an essential role in China during the last decade. Our results show that different monetary policy shocks cause asymmetric effects on macroeconomic and financial variables.

Variable annuity (VA) policies are typically issued on mutual funds invested in both fixed income and equity asset classes. However, due to the lack of specialized models to represent the dynamics of fixed income fund returns, the literature has primarily focused on studying long-term investment guarantees on single-asset equity funds. This article develops a mixed bond and equity fund model in which the fund return is linked to movements of the yield curve. Theoretical motivation for our proposed specification is provided through an analogy with a portfolio of rolling horizon bonds. Moreover, basis risk between the portfolio return and its risk drivers is naturally incorporated into our framework. Numerical results show that the fit of our model to Canadian VA data is adequate. Finally, the valuation of VAs is illustrated and it is found that the prevailing interest rate environment can have a substantial impact on guarantee costs.

Given an equipment complement, a specific crop mix has a probability distribution for whole-farm net returns. Increasing crop acreage while holding the set of equipment constant will reduce fixed costs per acre, but it will also increase the length of time required to complete crucial field operations such as planting and harvesting. Thus, the probability of encountering weather-related delays in fieldwork will increase. This increase in delays may cause a decline in yields and changes in the distribution of net returns. This paper develops a Target MOTAD model capable of capturing intra-year impacts on profit that arise from the timing of planting and harvesting operations as well as inter-year impacts on profits that are due to variations in economic and weather-related factors. The model relies on estimates of available fieldwork time and a crop's harvestable yield in different time periods throughout the harvest season.

In 1918 the United States Treasury delegated to the War Finance Corporation, a newly created off-budget federal agency, the task of buying Liberty bonds and later Victory notes in an effort to stabilize prices. Bayesian vector autoregression analysis of the security purchases indicates that the WFC purchases provided statistically significant price support, and marginally lowered bond yields while the program operated. Once WFC purchases ended, war bond yields increased substantially. Between bond issues, the Treasury financed its operations, including security purchases from the WFC, by issuing short-term debt, which affected the money market interest rate. The WFC's bond purchases are found to have a positive and significant impact on the call loan rate. Thus the WFC's bond purchases twisted the yield curve.

We construct yield curve models for the UK nominal, real and implied inflation spot rates considering the linkage between their term structures and some macroeconomic variables, in particular, realised inflation and real GDP growth. The paper extends the benchmark “yield-only” model proposed by Şahin et al. (2014) by exploring the bidirectional relations between the yield curve factors and the macroeconomic variables and proposes a “yield-macro” model. Although a simple autoregressive order one process fits the yield curve factors quite well the insertion of some macroeconomic variables such as realised inflation and real GDP growth improves the models significantly. We also model macroeconomic variables that take the term structures into account and compare the yield-macro model with Wilkie’s model both philosophically and empirically.

This paper discusses possible approaches to the construction of gilt yield indices published by the Financial Times. The existing method, described by Dobbie & Wilkie (1978) splits bonds into high, medium and low-coupon bands and fits separate yield curves to each. This method has been identified as susceptible to ‘catastrophic’ jumps when the least-squares fit jumps from one set of parameters to another set of quite different values. This problem is a result of non-linearities in the least-squares formula which can give rise to more than one local minimum. A desire to remove the risk of catastrophic changes prompted this research, which is being carried out as part of the work of the Fixed Interest Working Group.

Recent changes in the taxation of bonds has, further, prompted the need for a review of the yield indices. Significantly, since the announcement of the new tax regime, the old coupon effect has been removed. This has made the use of a single forward-rate curve appropriate for the first time.

A particular form of forward-rate curve is proposed as the basis for a revision of the gilt yield indices. This curve appears to give a significantly better fit than the present yield–curve model. It is also argued that the risk of catastrophic jumps has been reduced significantly.

Recent research shows that when commonly estimated dynamic Taylor rules, which are augmented with a lagged interest, are embedded in a variety of macroeconomic models, they imply a greater amount of predictable information about future movements in interest rates than is actually evident in the yield curve. We extend the analysis to consider more generally the predictability of the arguments of the Taylor rule—inflation and the output gap—in addition to the interest rate. Specifically, we compare the predictability of these three variables in a macroeconomic model with a dynamic Taylor rule to their predictability in real-time surveys of macroeconomic forecasters or a VAR model. We find that the strongest evidence against the dynamic Taylor rule is that while it is easy to predict the variables that enter the rule, it is very hard to predict actual interest rate changes. This disparity suggests that dynamic Taylor rules neglect important aspects of monetary policy behavior.