A structuraldecompositionoftheUSyieldcurve

By expandingthemacropartofmacro-financemodels,historicalfluctuationsinUS bond yieldsturnouttobelargelyconsistentwiththerationalexpectationshypothesis. Weestimateamedium-scalemacro-financeDSGEmodelofthetermstructureto establishthis.Ourfindingcontrastswithexistingmacro-financemodelsandsuggests that their—small-scaleornon-structural—perspectiveonthemacroeconomymutes expectations,therebyunderestimatingtheexpectationshypothesis’potential.Out-of- sample forecastsarecompetitivewithmoreflexibletermstructuremodels.Giventhe empiricalvalidation,weinterpretvariousepisodesthroughthelensofthemodeland investigatewhichstructuralshockscausetheyieldcurvetocontaininformationabout future growth.