Are Analysts Right? Macroeconomic Factors and Regime Switching in the Term Structure of Interest Rates

2008 ◽  
Author(s):  
Nina Boyarchenko
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Regime Switching ◽  
Macroeconomic Factors

scholarly journals Yield curve dynamics with macroeconomic factors in Iberian economies

2020 ◽  
Vol 10 (3) ◽  
pp. 193-203
Author(s):  
Isabel Maldonado ◽  
Carlos Pinho
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Error Variance ◽  
Impact Factors ◽  
Strong Impact ◽  
Impulse Response Functions ◽  
Macroeconomic Factors ◽  
Vector Autoregressive ◽  
Future Evolution

Abstract The aim of this paper is to analyse the bidirectional relation between the term structure of interest rates components and macroeconomic factors. Using a factor augmented vector autoregressive model, impulse response functions and forecasting error variance decompositions we find evidence of a bidirectional relation between yield curve factors and the macroeconomic factors, with increased relevance of yield factors over it with increased forecasting horizons. The study was conduct for the two Iberian countries using information of public debt interest rates of Spain and Portugal and macroeconomic factors extracted from a set of macroeconomic variables, including indicators of activity, prices and confidence. Results show that the inclusion of confidence and macroeconomic factors in the analysis of the relationship between macroeconomics and interest rate structure is extremely relevant. The results obtained allow us to conclude that there is a strong impact of changes in macroeconomic factors on the term structure of interest rates, as well as a significant impact factors of the term structure in the future evolution of macroeconomic factors.

scholarly journals Analysing Indian G-Secs with a Predictive Approach

2017 ◽  
Vol 16 (3) ◽  
pp. 39-55
Author(s):  
Serin Josy Thomas ◽  
Sahana Madhanagopal ◽  
Bikramaditya Ghosh
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Purchasing Power Parity ◽  
Bank Loans ◽  
Power Parity ◽  
Present Value ◽  
Macroeconomic Factors ◽  
Bond Yield ◽  
Panel Data Regression ◽  
Parity Price

The bond movement being observed keenly by the business communities across the world is primarily because of the fact that large organizations require a huge sum of money which cannot be met in the form of bank loans alone. The solution is to raise money from the public by issuing bonds. It is of equal interest to the investors because bonds are fixed income securities. In this market it is imperative to understand the interplay of macroeconomic factors such as inflation levels, interest rates, foreign exchange rates, purchasing power parity, price movements, monetary and fiscal policies. The rationale behind the decision to invest in a particular bond is directly influenced by the present value of the bond. This paper aims to build a model using Panel Data Regression to predict the present value of the bonds by considering the components of the term structure such as interest rates, maturity, bond yield etc.

scholarly journals Title: analysis of term structure of interest rates in Latin America countries from 2006 to 2014

2015 ◽  
Vol 13 (4) ◽  
pp. 650
Author(s):  
Felipe Stona ◽  
Jean Amann ◽  
Maurício Delago Morais ◽  
Divanildo Triches ◽  
Igor Clemente Morais
Keyword(s):  
Latin America ◽  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Principal Component ◽  
Vector Model ◽  
Yield Curves ◽  
Macroeconomic Factors ◽  
The Relationship ◽  
Latin America Countries

This article aims to investigate the relationship between the term structure of interest rates and macroeconomic factors in selected countries of Latin America, such as Brazil, Chile and Mexico, between 2006 and 2014, on an autoregressive vector model. Specifically, we perform estimations of Nelson-Siegel, Diabold-Li and principal component analysis to test how the change of macroeconomic factors, e.g. inflation, production and unemployment levels affect the yield curves. For Brazil and Mexico, GDP and inflation variables are relevant to change the yield curves, with the former shifting more the level, and the latter with greater influence on the slope. For Chile, inflation had the greatest impact on the level and, specifically for Mexico, the unemployment variable also changed the slope of the yield curve.

scholarly journals A GENERAL EQUILIBRIUM MODEL OF THE TERM STRUCTURE OF INTEREST RATES UNDER REGIME-SWITCHING RISK

2005 ◽  
Vol 08 (07) ◽  
pp. 839-869 ◽  
Author(s):  
SHU WU ◽  
YONG ZENG
Keyword(s):  
General Equilibrium ◽  
Interest Rates ◽  
Term Structure ◽  
Risk Premium ◽  
Equilibrium Model ◽  
Regime Switching ◽  
Yield Curve ◽  
Closed Form Solution ◽  
Form Solution ◽  
General Equilibrium Model

This paper develops a general equilibrium model of the term structure of interest rates in the presence of the systematic risk of regime shifts. The model elucidates the economic nature of the regime-shift risk premium and introduces a new source of time-variation in bond returns. A closed-form solution for the term structure of interest rates is obtained under an affine model using log-linear approximation. The model is estimated by Efficient Method of Moments. The regime-switching risk is found to be statistically significant and mostly affect the long-end of the yield curve.

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