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Specification analysis of interest rates factors : an international perspective


  • Le Fol, Gaëlle


  • Tiozzo Pezzoli, Luca


The aim of this thesis is to model the dynamics of international term structure of interest rates taking into consideration several dependence channels.Thanks to a new international Treasury yield curve database, we observe that the explained variability decision criterion, suggested by the literature, is not able to select the best combination of factors characterizing the joint dynamics of yield curves. We propose a new methodology based on the maximisation of the likelihood function of a Gaussian state-space model with common and local factors. The associated identification problem is solved in an innovative way. By estimating several sets of countries, we select two global (and three local) factors which are also useful to forecast macroeconomic variables in each considered economy.In addition, our method allows us to detect hidden factors in the international bond returns. They are not visible through a classical principal component analysis of expected bond returns but they are helpful to forecast inflation and industrial production. Keywords: International treasury yield curves, common and local factors, state-space models, EM algorithm, International bond risk premia, principal components.

Suggested Citation

  • Tiozzo Pezzoli, Luca, 2013. "Specification analysis of interest rates factors : an international perspective," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/13417 edited by Le Fol, Gaëlle, April.
  • Handle: RePEc:dau:thesis:123456789/13417
    Note: dissertation

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    References listed on IDEAS

    1. Jan C. van Ours, 2000. "Do Active Labor Market Policies Help Unemployed Workers to Find and Keep Regular Jobs?," William Davidson Institute Working Papers Series 289, William Davidson Institute at the University of Michigan.
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    6. Villa, Juan M., 2012. "Simplifying the estimation of difference in differences treatment effects with Stata," MPRA Paper 43943, University Library of Munich, Germany.
    7. Michel Sollogoub & Valérie Ulrich, 1999. "Les jeunes en apprentissage ou en lycée professionnel," Économie et Statistique, Programme National Persée, vol. 323(1), pages 31-52.
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    More about this item


    Courbes des taux internationales; Facteurs communs et locaux; Modèle espace-état; Algorithme EM; Rentabilités en excès des obligations; Analyse en composantes principales; Inflation; Croissance économique; International treasury yield curves; Common and local factors; State-space models; EM algorithm; International bond risk premia; Principal components; Inflation; Economic growth;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General


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