Authors: Richard K. Crump and Nikolay Gospodinov
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Staff Reports
Deconstructing the Yield Curve
Number 884
April 2019 Revised August 2023
April 2019 Revised August 2023
JEL classification: C15, C58, G10, G12
We introduce a novel nonparametric bootstrap for the nominal yield curve which is agnostic to the true factor structure. We deconstruct the yield curve into primitive objects, with weak cross-sectional and time-series dependence, which serve as building blocks for resampling the data. We analyze the asymptotic and finite-sample properties of the bootstrap for mimicking salient features of the data and conducting inference on bond return predictability. We demonstrate the applicability of our results to: the “tent shape” in forward rates, regression tests of the expectations hypothesis, the role of trend inflation in expected bond returns, and yield-based forecasts of recessions.
Author Disclosure Statement(s)
Richard K. Crump
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “Deconstructing the Yield Curve,” joint with Nikolay Gospodinov.
Nikolay Gospodinov
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “Deconstructing the Yield Curve,” joint with Nikolay Gospodinov.
Nikolay Gospodinov
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
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