Global Factors in the Term Structure of Interest Rates

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 expla...

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Bibliographic Details
Main Author: Abbritti, Mirko
Other Authors: Dell'Erba, Salvatore, Moreno, Antonio, Sola, Sergio
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2013
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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245 0 0 |a Global Factors in the Term Structure of Interest Rates  |c Mirko Abbritti, Salvatore Dell'Erba, Antonio Moreno, Sergio Sola 
260 |a Washington, D.C.  |b International Monetary Fund  |c 2013 
300 |a 41 pages 
651 4 |a United States 
653 |a Economic & financial crises & disasters 
653 |a Interest rates 
653 |a Inflation 
653 |a Finance 
653 |a Dynamic Treatment Effect Models 
653 |a Financial crises 
653 |a Monetary economics 
653 |a Financial services 
653 |a Deflation 
653 |a Open Economy Macroeconomics 
653 |a Monetary expansion 
653 |a Diffusion Processes 
653 |a Yield curve 
653 |a Time-Series Models 
653 |a Global Financial Crisis, 2008-2009 
653 |a Price Level 
653 |a Global financial crisis of 2008-2009 
653 |a Banks and Banking 
653 |a Prices 
653 |a Macroeconomics 
653 |a Monetary policy 
653 |a Interest Rates: Determination, Term Structure, and Effects 
653 |a Dynamic Quantile Regressions 
653 |a Financial Risk Management 
653 |a Monetary Policy 
653 |a State Space Models 
653 |a Money and Monetary Policy 
653 |a Financial Crises 
700 1 |a Dell'Erba, Salvatore 
700 1 |a Moreno, Antonio 
700 1 |a Sola, Sergio 
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520 |a 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