00000nam 2200000za 4500 9.858197 CaOODSP 20221107155933 cr ||||||||||| 180627s2018 oncd ob f000 0 eng d CaOODSP eng eng fre FB3-5/2018-24E-PDF Zhao, Guihai. Ambiguity, nominal bond yields and real bond yields [electronic resource] / by Guihai Zhao. [Ottawa] : Bank of Canada, 2018. 46 p. : col. charts. Bank of Canada staff working paper, 1701-9397 ; 2018-24 "June 2018." Includes bibliographical references (p. 37-41). "Equilibrium bond-pricing models rely on inflation being bad news for future growth to generate upward-sloping nominal yield curves. We develop a model that can generate upward-sloping nominal and real yield curves by instead using ambiguity about inflation and growth. Ambiguity can help resolve the puzzling fact that upward-sloping yield curves have persisted despite positive inflation shocks changing from negative to positive news about growth in the last twenty years. Investors make decisions using worst-case beliefs, under which the expectations hypothesis roughly holds. However, inflation and growth evolve over time under the true distribution, and this difference makes excess returns on long-term bonds predictable. The model is also consistent with the recent empirical findings on the term structure of equity returns"--Abstract, p. ii. Includes abstract in French. Bonds--Prices--Econometric models Inflation Interest rates Bank of Canada. Staff working paper (Bank of Canada) 1701-9397 ; 2018-24. (CaOODSP)9.806221 PDF 944 KB https://publications.gc.ca/collections/collection_2018/banque-bank-canada/FB3-5-2018-24-eng.pdf