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There is a huge literature modelling the yield curve. For instance, the affine term structure literature, both in continuous and in discrete time, has many models with different factors, models that have micro foundations, pure forecasting models, etc.

What would be your favorite textbook when it comes to interest rate modelling and its connections to macroeconomics? Suppose you're picking a book to teach a PhD-level class with it.

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  • $\begingroup$ I think the lack of response is probably because of the second requirement being "and its connection to macro-economics". That connection might be tackled in papers rather than texts ? That's just a guess. I have close to zero formal background in both fields. but somewhat famiiar with textbooks in both fields. $\endgroup$
    – mark leeds
    Commented Jul 30 at 4:38
  • $\begingroup$ @markleeds that makes sense. A lot of interest modelling is done my people in Financial Math with a focus on pricing derivatives etc. And lots of Macro models are not super realistic regarding term structure stuff. $\endgroup$
    – Raul Guarini Riva
    Commented Jul 30 at 13:07
  • $\begingroup$ yeah. I would google for what you're looking for. It may come up in a paper. $\endgroup$
    – mark leeds
    Commented Jul 30 at 15:36

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