An Empirical Analysis of Asymmetries in the Term Structure of Korean Government Bonds (in Korean)

The term structure of interest rates is a key information variable, which indicates the movements of future inflation and economic activities. This paper finds that the yields on KGBs (3-month and 3-year Korean Government Bonds) involve asymmetric term structure. While the existing literature on the term structure of interest rates assumes thatcointegrating relationship is symmetric, but empirical results suggest an asymmetric term structure for KGBs. Asymmetric term structure is found in not only the long-run relationship but also short-run error correction mechanism for KGBs. Specifically, the estimated long-run relationship depends on whether or not the long-term rate is rising. Also, an equilibrium is restored swiftly when the yield on 3-year KGBs is falling, but the speed of adjustment is slow when increasing. This finding reflects that central banks may be apt to raise short-term interest rates gradually but lower them quickly in response to recessions or economic crises. This result is consistent with asymmetric central banks’ policy (Enders and Siklos, 2001; Bohl and Siklos, 2004). This paper suggests CCR (Canonical-Cointegrating-Regression based)-CUSUM test and applies the test to the detection of asymmetric cointegrating relationship between KGBs.