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On Brazil’s Term Structure

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  • Rodrigo Cabral
  • Richard Munclinger
  • Luiz Alves
  • Marco Rodriguez Waldo
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    Abstract

    This paper characterizes the term structure of Treasury bond yields for Brazil, and estimates a Nelson-Siegel Model to reproduce its stylized facts for the period 2004-2010. For this purpose, this paper uses a software developed by Fund staff. In addition, the paper estimates two versions of the Nelson-Siegel Model that incorporates macroeconomic variables with the aim of assessing the dynamic interactions between the yield curve and the macroeconomy.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/113.

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    Length: 33
    Date of creation: 01 May 2011
    Date of revision:
    Handle: RePEc:imf:imfwpa:11/113

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    Postal: International Monetary Fund, Washington, DC USA
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    Related research

    Keywords: Brazil; Economic models; Interest rate structures; Public debt; bonds; bond; statistics; government bonds; descriptive statistics; standard errors; forecasting; equation; bond yields; coupon bonds; survey; correlation; standard deviations; treasury bonds; financial institutions; correlations; equations; yields on bonds; financial structure; econometrics; government bond; government bond yields; zero coupon bonds; bond prices; discount bond; reserve requirements; financial assets; statistical techniques; bootstrap; stochastic process; cash flow; samples; nominal bonds; stock index; zero-coupon bonds; covariance; estimation procedure; computation; treasury bond yields; discount bonds; inflation linked bonds; number of parameters; bond rates; time series; sampling; maximum likelihood estimation; financial markets; covariances; coupon bond; bond returns; bond price; number of variables; sample bias; treasury bond; bond market;

    This paper has been announced in the following NEP Reports:

    References

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    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.:
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    1. Glenn Rudebusch & Tao Wu, 2004. "A macro-finance model of the term structure, monetary policy, and the economy," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Mar.
    2. Marco Shinobu Matsumura & Ajax Reynaldo Bello Moreira & José Valentim Machado Vicente, 2010. "Forecasting the Yield Curve with Linear Factor Models," Working Papers Series, Central Bank of Brazil, Research Department 223, Central Bank of Brazil, Research Department.
    3. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy Rules for Inflation Targeting," NBER Working Papers 6512, National Bureau of Economic Research, Inc.
    4. International Monetary Fund, 2010. "On the Estimation of Term Structure Models and An Application to the United States," IMF Working Papers 10/258, International Monetary Fund.
    5. Lima, Alexandre Maia Correia & Issler, João Victor, 2003. "A hipótese das expectativas na estrutura a termo de juros no Brasil: Uma aplicação de modelos de valor presente," Economics Working Papers (Ensaios Economicos da EPGE) 480, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    6. Francis X. Diebold & Monika Piazzesi & Glenn D. Rudebusch, 2005. "Modeling Bond Yields in Finance and Macroeconomics," PIER Working Paper Archive 05-008, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    7. 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, Elsevier, vol. 131(1-2), pages 309-338.
    8. Vicente, José & Tabak, Benjamin M., 2008. "Forecasting bond yields in the Brazilian fixed income market," International Journal of Forecasting, Elsevier, Elsevier, vol. 24(3), pages 490-497.
    9. Marco Matsumara & Ajax R.B. Moreira, 2005. "Can Macroeconomic Variables Account for the Term Structure of Sovereign Spreads? Studying the Brazilian Case," Discussion Papers, Instituto de Pesquisa Econômica Aplicada - IPEA 1106, Instituto de Pesquisa Econômica Aplicada - IPEA.
    10. Diebold, Francis X. & Li, Canlin, 2006. "Forecasting the term structure of government bond yields," Journal of Econometrics, Elsevier, Elsevier, vol. 130(2), pages 337-364, February.
    11. Tomas Björk & Bent Jesper Christensen, 1999. "Interest Rate Dynamics and Consistent Forward Rate Curves," Mathematical Finance, Wiley Blackwell, Wiley Blackwell, vol. 9(4), pages 323-348.
    12. Fernandes Ribeiro, Priscila & Pereira, Pedro Luiz Valls, 2010. "Economic cycles and term structure : application to Brazil," Textos para discussão 259, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    13. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 60(4), pages 473-89, October.
    14. Caio Almeida & Romeu Gomes & André Leite & José Vicente, 2007. "Does Curvature Enhance Forecasting?," Working Papers Series, Central Bank of Brazil, Research Department 155, Central Bank of Brazil, Research Department.
    15. Siegel, Andrew F. & Nelson, Charles R., 1988. "Long-Term Behavior of Yield Curves," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 23(01), pages 105-110, March.
    16. Marcos S. Matsumura & Ajax R. B. Moreira, 2006. "Macro Factors and the Brazilian Yield Curve With no Arbitrage Models," Discussion Papers, Instituto de Pesquisa Econômica Aplicada - IPEA 1210, Instituto de Pesquisa Econômica Aplicada - IPEA.
    17. 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, Central Bank of Brazil, Research Department 73, Central Bank of Brazil, Research Department.
    18. Benjamin Miranda Tabak & Sandro Canesso de Andrade, 2001. "Testing the Expectations Hypothesis in the Brazilian Term Structure of Interest Rates," Working Papers Series, Central Bank of Brazil, Research Department 30, Central Bank of Brazil, Research Department.
    19. Ricardo D. Brito & Angelo José Mont'Alverne Duarte & Osmani Teixeira de Carvalho Guillén, 2003. "O Prêmio pela Maturidade na Estrutura a Termo das Taxas de Juros Brasileiras," Working Papers Series, Central Bank of Brazil, Research Department 72, Central Bank of Brazil, Research Department.
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