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US and EA yield curve persistence during the COVID-19 pandemic

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  • Papailias, Fotis

Abstract

This paper investigates changes in persistence caused by the COVID-19 pandemic in the US and EA yield curves. We extract the long-term, short-term and medium-term factors and proxy the persistence by estimating the autoregressive coefficient of each factor. To examine the time-varying effects, we employ a local linear estimation. Our findings suggest that, during the first phases of the pandemic, the US long-term and short-term factors exhibited explosive behaviour while, at the same time, the EA factors diminished in persistence, making the EA yield curve more predictable even though the EA countries were hit by the pandemic somewhat earlier than the US.

Suggested Citation

  • Papailias, Fotis, 2022. "US and EA yield curve persistence during the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001689
    DOI: 10.1016/j.frl.2021.102087
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    References listed on IDEAS

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    More about this item

    Keywords

    Term structure; Yield curve; Nelson-siegel; Coronavirus; COVID-19; Time-varying coefficient models; Autoregressive processes; US; Euro-area;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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