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The time-varying U.S. treasury bond demand elasticity

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  • Yang, Bohan
  • Wang, Bin

Abstract

We investigate the time-varying demand elasticity of U.S. Treasury bonds in the international financial market using a TVP-VAR-SV model. We find that the demand elasticity decreases when the risk of the international financial market rises but increases when the risk of the U.S. financial market rises, though the demand elasticity is not significantly different from that during the financial crisis. Our findings suggest that the U.S. Treasury bonds have market power and convenience yields as safe assets in the international financial market, but they also face competition from other countries’ bonds.

Suggested Citation

  • Yang, Bohan & Wang, Bin, 2024. "The time-varying U.S. treasury bond demand elasticity," Economics Letters, Elsevier, vol. 241(C).
    • Handle: RePEc:eee:ecolet:v:241:y:2024:i:c:s0165176524002908
    DOI: 10.1016/j.econlet.2024.111806
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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