This project is concerned with the behavior of interest rates, inflation, asset returns, and the relations between these variables and business conditions. Research on the term structure of interest rates will examine the information contained in U.S. government bond yields about future interest rates, inflation, and real bond returns. Research on corporate bonds and stocks will examine common factors in the variation through time in their returns. An important part of this work will be to relate the short-term and long-term behavior of interest rates, inflation, and asset returns to measures of business conditions. The goal of project is a better understanding of the links between financial markets and the real economy, eg. output, investment, employment, etc. Understanding these links takes on even greater importance with the increasing globalization of financial markets, investment decisions, and output decisions.
