Connecting the dots: a yield curve perspective on New Zealand’s interest rates
AbstractThis article explains the concept of the yield curve, the pattern of interest rates by their time to maturity, and how that concept helps to provide some perspective on the multitude of different interest rates that exist in modern economies. The dominance of macroeconomic influences on the government yield curve are discussed, and then the additional factors of default risk and liquidity risk are introduced in the context of the bank and mortgage yield curves. The article also indicates how careful analysis of the yield curve may be used to back out information of interest to the Reserve Bank, such as the market expectations about the path of the Official Cash Rate (OCR) and future economic growth, and how interest rate influence the exchange rate.
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.
Bibliographic InfoArticle provided by Reserve Bank of New Zealand in its journal Reserve Bank of New Zealand Bulletin.
Volume (Year): 73 (2010)
Issue (Month): (September)
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.:
- Leo Krippner, 2006. "A Theoretically Consistent Version of the Nelson and Siegel Class of Yield Curve Models," Applied Mathematical Finance, Taylor & Francis Journals, vol. 13(1), pages 39-59.
- Diebold, Francis X. & Rudebusch, Glenn D. & Borag[caron]an Aruoba, S., 2006.
"The macroeconomy and the yield curve: a dynamic latent factor approach,"
Journal of Econometrics,
Elsevier, vol. 131(1-2), pages 309-338.
- Francis X. Diebold & Glenn D. Rudebusch & S. Boragan Aruoba, 2004. "The Macroeconomy and the Yield Curve: A Dynamic Latent Factor Approach," NBER Working Papers 10616, National Bureau of Economic Research, Inc.
- Tom Doan, . "RATS programs to replicate Diebold,Rudebusch,Aruoba 2006 factor model," Statistical Software Components RTZ00047, Boston College Department of Economics.
- Leo Krippner, 2006. "A Yield Curve Perspective on Uncovered Interest Parity," Working Papers in Economics 06/16, University of Waikato, Department of Economics.
- Leo Krippner, 2008. "A Macroeconomic Foundation for the Nelson and Siegel Class of Yield Curve Models," Research Paper Series 226, Quantitative Finance Research Centre, University of Technology, Sydney.
- Enzo Cassino, 2012. "Modelling New Zealand mortgage interest rates?," Reserve Bank of New Zealand Analytical Notes series AN2012/10, Reserve Bank of New Zealand.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Reserve Bank of New Zealand Knowledge Centre).
If references are entirely missing, you can add them using this form.