A factor model of term structure slopes in eurocurrency markets
AbstractThis paper departs from previous research in dealing with dimensionality reduction in the space of international term structure slopes. Recent empirical work has documented the existence of information in the slope of the term structure which is relevant to forecast future changes in economic activity, and it is additional to information in past economic activity, inflation, or in any leading indicator index [see Estrella and Hardouvelis (1991), Stock and Watson (1988), Hardouvelis (1994) and Plosser and Rouwenhorst (1994), among others]. This implies that a good forecasting model of term structure slopes could be helpful to anticipate changes in economic activity with an even longer anticipation.
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Bibliographic InfoPaper provided by Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales in its series Documentos del Instituto Complutense de Análisis Económico with number 0224.
Length: pages 16
Date of creation: 2002
Date of revision:
Term structure of interest rates; Term structure slope; Principal components; Eurocurrencies.;
Other versions of this item:
- Emilio Dominguez & Alfonso Novales, 2002. "A factor model of term structure slopes in Eurocurrency markets," Applied Economics Letters, Taylor and Francis Journals, vol. 9(9), pages 585-593.
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
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- Krylova, Elizaveta & Nikkinen, Jussi & Vähämaa, Sami, 2009.
"Cross-dynamics of volatility term structures implied by foreign exchange options,"
Journal of Economics and Business,
Elsevier, vol. 61(5), pages 355-375, September.
- Krylova, Elizaveta & Nikkinen, Jussi & Vähämaa, Sami, 2005. "Cross-dynamics of volatility term structures implied by foreign exchange options," Working Paper Series 0530, European Central Bank.
- Pilar Abad & Alfonso Novales, 2002.
"An Error Correction Factor Model of Term Structure Slopes in International Swaps Markets,"
Documentos del Instituto Complutense de AnÃ¡lisis EconÃ³mico
0222, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
- Abad, Pilar & Novales, Alfonso, 2005. "An error correction factor model of term structure slopes in international swap markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(3), pages 229-254, July.
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