Joint dynamics of Brazilian interest rate yields and macro variables under a no-arbitrage restriction
AbstractThis work combines macroeconomic factors and an arbitrage-free model of bond yields to explain the behavior of dollar interest rate contracts traded in Brazil. We relax restrictions that macroeconomic and latent variables are independent of each other and of the policy interest rate. The results show that the Ang and Piazzesi (Ang & Piazzesi, 2003) model is more accurate than the random walking model and provides a good forecast of the interest rate sign changes when we consider conditional dependence among latent and macroeconomic variables.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economics and Business.
Volume (Year): 64 (2012)
Issue (Month): 5 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/jeconbus
Interest rate term structure; Macroeconomic variables; No-arbitrage;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chiona Balfoussia & Michael Wickens, 2004.
"Macroeconomic Sources of Risk in the Term Structure,"
CESifo Working Paper Series
1329, CESifo Group Munich.
- Hiona Balfoussia & Mike Wickens, 2007. "Macroeconomic Sources of Risk in the Term Structure," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(1), pages 205-236, 02.
- Michael R. Wickens & Chiona Balfoussia, 2004. "Macroeconomic Sources of Risk in the Term Structure," CEIS Research Paper 61, Tor Vergata University, CEIS.
- Andrew Ang & Sen Dong, 2005.
"No-Arbitrage Taylor Rules,"
2005 Meeting Papers
22, Society for Economic Dynamics.
- Andrew Ang & Monika Piazzesi, 2001.
"A No-Arbitrage Vector Autoregression of Term Structure Dynamics with Macroeconomic and Latent Variables,"
NBER Working Papers
8363, National Bureau of Economic Research, Inc.
- Ang, Andrew & Piazzesi, Monika, 2003. "A no-arbitrage vector autoregression of term structure dynamics with macroeconomic and latent variables," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 745-787, May.
- Monika Piazzesi, 2005. "Bond Yields and the Federal Reserve," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 311-344, April.
- Fernandez, Viviana, 2008.
"Copula-based measures of dependence structure in assets returns,"
Physica A: Statistical Mechanics and its Applications,
Elsevier, vol. 387(14), pages 3615-3628.
- Viviana Fernandez, 2006. "Copula-based measures of dependence structure in assets returns," Documentos de Trabajo 228, Centro de Economía Aplicada, Universidad de Chile.
- Hordahl, Peter & Tristani, Oreste & Vestin, David, 2006.
"A joint econometric model of macroeconomic and term-structure dynamics,"
Journal of Econometrics,
Elsevier, vol. 131(1-2), pages 405-444.
- Hördahl, Peter & Tristani, Oreste & Vestin, David, 2004. "A joint econometric model of macroeconomic and term structure dynamics," Working Paper Series 0405, European Central Bank.
- Peter Hordahl & Oreste Tristani & David Vestin, 2004. "A joint econometric model of macroeconomic and term structure dynamics," Money Macro and Finance (MMF) Research Group Conference 2003 48, Money Macro and Finance Research Group.
- Peter Hoerdahl & Oreste Tristani, 2004. "A joint econometric model of macroeconomic and term structure dynamics," Econometric Society 2004 North American Summer Meetings 379, Econometric Society.
- Gregory R. Duffee, 2002. "Term Premia and Interest Rate Forecasts in Affine Models," Journal of Finance, American Finance Association, vol. 57(1), pages 405-443, 02.
- Aggarwal, Reena & Inclan, Carla & Leal, Ricardo, 1999. "Volatility in Emerging Stock Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(01), pages 33-55, March.
- Glenn D. Rudebusch & Tao Wu, 2007. "Accounting for a Shift in Term Structure Behavior with No-Arbitrage and Macro-Finance Models," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 395-422, 03.
- Eduardo J. A. Lima & Felipe Luduvice & Benjamin M. Tabak, 2006. "Forecasting Interest Rates: an application for Brazil," Working Papers Series 120, Central Bank of Brazil, Research Department.
- Koedijk, Kees & Kole, Erik & Verbeek, Marno, 2006.
"Selecting Copulas for Risk Management,"
CEPR Discussion Papers
5652, C.E.P.R. Discussion Papers.
- Mark R. Stone & W. Christopher Walker & Yosuke Yasui, 2009. "From Lombard Street to Avenida Paulista: Foreign Exchange Liquidity Easing in Brazil in Response to the Global Shock of 2008-09," IMF Working Papers 09/259, International Monetary Fund.
- Wu, Tao, 2006. "Macro Factors and the Affine Term Structure of Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(7), pages 1847-1875, October.
- Getúlio Borges da Silveira & Octavio Bessada, 2003. "Análise de componentes principais de dados funcionais - uma aplicação às estruturas a termo de taxas de juros," Working Papers Series 73, Central Bank of Brazil, Research Department.
- Darrell Duffie & Rui Kan, 1996. "A Yield-Factor Model Of Interest Rates," Mathematical Finance, Wiley Blackwell, vol. 6(4), pages 379-406.
- Junker, Markus & Szimayer, Alex & Wagner, Niklas, 2006. "Nonlinear term structure dependence: Copula functions, empirics, and risk implications," Journal of Banking & Finance, Elsevier, vol. 30(4), pages 1171-1199, April.
- Sebastian Edwards & Raul Susmel, 2003. "Interest-Rate Volatility in Emerging Markets," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 328-348, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.