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Estimating and Forecasting the Yield Curve Using a Markov Switching Dynamic Nelson and Siegel Model

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  • Martin Gonzalez-Rozada

    ()

  • Martin sola

    ()

  • Constantino Hevia

    ()

  • Fabio Spagnolo

    ()

Abstract

In this paper we estimate the yield curve of U.S. government bonds using a Markov switching latent variable model. We show how measures such as the level, slope, and curvature of the yield curve are a�ected by business cycle conditions. We present a switching latent model which not only seem to capture this features in sample but also performs well out of sample.

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Bibliographic Info

Paper provided by Universidad Torcuato Di Tella in its series Department of Economics Working Papers with number 2012-07.

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Length: 47 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:udt:wpecon:2012-07

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Web page: http://www.utdt.edu/ver_contenido.php?id_contenido=439&id_item_menu=568
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Keywords: Yield Curve; Term structure of interest rates; Markov regime switching; Maxi- mum likelihood; Risk premium.;

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References

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