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Global Factors in the Term Structure of Interest Rates, Mirko Abbritti, Salvatore Dell'Erba, Antonio Moreno, Sergio Sola

Abstract
This paper introduces global factors within a FAVAR framework in an empirical affine term structure model. We apply our method to a panel of international yield curves and show that global factors account for more than 80 percent of term premia in advanced economies. In particular they tend to explain long-term dynamics in yield curves, as opposed to domestic factors which are instead more relevant to short-run movements. We uncover the key role for global curvature in shaping term premia dynamics. We show that this novel factor precedes global economic and financial instability. In particular, it coincides with immediate expectations of permanent expansionary monetary policy during the recent crisis
Table Of Contents
Cover; Contents; I. Introduction; II. Data And Motivation; III. A Global Term Structure Model; A. Affine Model; B. Effects of Global Shocks; IV. Estimation Strategy; A. Estimation of the Latent Factors; B. Estimation of the Remaining Parameters; V. Results; A. Estimates of the Global Factors; B. Model Performance; C. How Important are Global Factors for Domestic Factors and Yields?; D. Term Premia Dynamics; E. Global Factors and Term Premium Dynamics; VI. Robustness Checks; VII. Conclusions and Extensions; Tables; 1. Block Exogeneity Test; 2. Model Fit
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (42 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781475513882

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