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Yield Curve Predictability, Regimes, and Macroeconomic Information: A Data-Driven Approach

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Author Info
Francesco Audrino ()
Kameliya Filipova ()

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Abstract

We propose an empirical approach to determine the various economic sources driving the US yield curve. We allow the conditional dynamics of the yield at different maturities to change in reaction to past information coming from several relevant predictor variables. We consider both endogenous, yield curve factors and exogenous, macroeconomic factors as predictors in our model, letting the data themselves choose the most important variables. We find clear, different economic patterns in the local dynamics and regime specification of the yields depending on the maturity. Moreover, we present strong empirical evidence for the accuracy of the model in fitting in-sample and predicting out-of-sample the yield curve in comparison to several alternative approaches.

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File URL: http://www.vwa.unisg.ch/RePEc/usg/dp2009/DP-10-Au.pdf
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Publisher Info
Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2009 with number 2009-10.

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Length: 37 pages
Date of creation: May 2009
Date of revision:
Handle: RePEc:usg:dp2009:2009-10

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Related research
Keywords: Yield curve modeling and forecasting; Macroeconomic variables; Tree-structured models; Threshold regimes; GARCH; Bagging;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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