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Further Evidence on the Impact of Economic News on Interest Rates

  • Dominique Guégan,Florian Ielpo

    ()

    (Centre d'Economie de la Sorbonne, Paris)

We investigate the shape of the term structure reaction of the US swap rates to announcements using several linear and non-linear time series models. We document the non-linearity of the market reaction to macroeconomic news. First, we find that the introduction of non linear models leads to the finding of a significant number of macroeconomic figures that actually produce an effect over the yield curve. Second, we noticed at least four types of patterns in the term structure reaction of interest rates across maturities, including the humpshaped one that is generally considered. Third, we propose a first interpretation and classification of these different shapes. Fourth we find that the existence of outliers in interest rates leads to an underestimation of the reaction of interest rates to announcements, explaining the different results obtained between high-frequency and daily datasets.

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Article provided by SKEMA Business School in its journal Frontiers in Finance and Economics.

Volume (Year): 6 (2009)
Issue (Month): 2 (October)
Pages: 1 - 45

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Handle: RePEc:ffe:journl:v:6:y:2009:i:2:p:1-45
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  1. Knez, Peter J & Litterman, Robert & Scheinkman, Jose Alexandre, 1994. " Explorations into Factors Explaining Money Market Returns," Journal of Finance, American Finance Association, vol. 49(5), pages 1861-82, December.
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  8. Bernanke, Ben S. & Boivin, Jean, 2003. "Monetary policy in a data-rich environment," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 525-546, April.
  9. Andrew Ang & Sen Dong & Monika Piazzesi, 2007. "No-Arbitrage Taylor Rules," NBER Working Papers 13448, National Bureau of Economic Research, Inc.
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  12. N. Kundan Kishor & Evan F. Koenig, 2009. "VAR Estimation and Forecasting When Data Are Subject to Revision," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(2), pages 181-190, July.
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