Essays in Macro-Finance and International Finance

This dissertation contains three essays on macro-finance and international finance. In Chapter 1, Richard Clarida and I study the term structure of US interest rates using observable macro factors as inputs to a Taylor-type rule that can account for the time path of the short term interest rate. Using a standard essentially affine model, we build directly on the pioneering work of Ang and Piazzesi, Rudebusch and Wu, and others but extend their analysis to a framework in which all macro factors are observable. We focus on the period since 1997 when US inflation expectations have been well anchored and inflation indexed bonds - which provide useful information on expected inflation and expected future real interest rates - have been issued by the US government. In contrast to many previous studies that - of necessity - focus on earlier periods when low frequency movements in expected inflation appeared to dominate, in our sample variation in expected inflation at longer horizons is modest and the yield curve is importantly driven by the evolution of the `neutral' real policy rate as estimated by Laubach and Williams. Deviations of the policy rate from the Taylor rule path are found t