Macroeconomic Determinants of the Movement of the Yield Curve

Vargas, Gregorio A. (2005): Macroeconomic Determinants of the Movement of the Yield Curve.

Abstract

Monetary policy has a significant effect on long-term interest rates and shocks due to inflation and monetary policy have the largest impact on the volatility of long-term interest rates. Long-term interest rates provide significant upward momentum on short-term interest rates and shocks to peso-dollar exchange rate and budget deficit have the strongest impact on the volatility of short-term interest rates. Inflation, peso-dollar exchange rate and non-performing loans significantly drive the medium-term interest rates and shocks due to these are the largest source of volatility for medium-term interest rates.

• Item Type: MPRA Paper
• Language: English
• Keywords: yield curve, Nelson-Siegel model, VAR, volatility
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

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