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Macrofinance Model of the Czech Economy

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  • International Monetary Fund
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    Abstract

    The paper developes a VAR macrofinance model of the Czech economy. It shows that yield misalignments from the yields implied by the macrofinance model partially determine subsequent yield changes over three to nine months. These yield misalignments tend to persist for a number of months. This persistence of the misalignments was explained by (a) the fact that the macro-economy influences asset markets only at lower frequencies, (b) the liquidity effect particularly during the times of capital inflows to Czech Republic, and (c) the fact that not all misalignments were greater than their historical one standard deviation.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=25780
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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/78.

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    Length: 49
    Date of creation: 01 Mar 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/78

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    Related research

    Keywords: Economic models; Financial assets; Interest rate structures; bond; bond yield; government bond; bond yields; correlation; bonds; forecasting; stock exchange; government bond yield; coupon bond; principal components analysis; bond market; financial markets; government bond yields; standard deviation; government bond market; equation; time series; money market; statistics; descriptive statistics; bond yield curve; number of parameters; statistic; vector autoregression; money market rates; econometrics; bond yield curves; ordinary least squares regression; polynomial; dummy variable; significance level; bond returns; correlations; parsimonious model; autocorrelation; asset markets; stock market; functional form; least squares regression; government bonds; stock market index; statistical method; bond issues; bond prices; bond portfolio; statistical models; stock market volatility; estimation procedure; rate bonds; overvaluations; financial stability; explanatory power; bond issue; computation; mathematical methods; kurtosis; term bond; statistical terms; dummy variables; bond investments; linear models; equations; bond securities; domestic interest rates; bond price; money market yield curve; stochastic differential equations;

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    1. Francis X. Diebold & Monika Piazzesi & Glenn Rudebusch, 2005. "Modeling Bond Yields in Finance and Macroeconomics," NBER Working Papers 11089, National Bureau of Economic Research, Inc.
    2. Alexander W. Hoffmaister & Jorge Roldos & Anita Tuladhar, 2010. "Yield Curve Dynamics and Spillovers in Central and Eastern European Countries," IMF Working Papers 10/51, International Monetary Fund.
    3. Diebold, Francis X. & Li, Canlin, 2003. "Forecasting the term structure of government bond yields," CFS Working Paper Series 2004/09, Center for Financial Studies (CFS).
    4. 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.
    5. 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.
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