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Euro Interest Rate Swap Yields: Some ARDL Models

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  • Tanweer Akram
  • Khawaja Mamun

Abstract

This paper examines the dynamics of euro-denominated (EUR) long-term interest rate swap yields. It shows that the short-term interest rate has an economically and statistically significant effect on EUR swap yields of different maturity tenors, after controlling for various key macroeconomic variables. It presents several autoregressive distributive lag (ARDL) models of the dynamics of EUR swap yields. The estimated econometric models of EUR swap yields of different maturity tenors imply that the European Central Bank (ECB) exerts substantial influence on interest rate swap yields, primarily through the effect of its actions on the current short-term interest rate. Examining the case of EUR interest rate swaps, the findings of the paper lend additional credence to John Maynard Keynes's hypothesis concerning the ability of a central bank to influence long-term market interest rates.

Suggested Citation

  • Tanweer Akram & Khawaja Mamun, 2024. "Euro Interest Rate Swap Yields: Some ARDL Models," Economics Working Paper Archive wp_1051, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_1051
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    References listed on IDEAS

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    1. Tanweer Akram, 2023. "Multifactor Keynesian models of the long-term interest rate," Applied Economics Letters, Taylor & Francis Journals, vol. 30(9), pages 1222-1227, May.
    2. Sven Klingler & Suresh Sundaresan, 2019. "An Explanation of Negative Swap Spreads: Demand for Duration from Underfunded Pension Plans," Journal of Finance, American Finance Association, vol. 74(2), pages 675-710, April.
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    Cited by:

    1. Tanweer Akram & Khawaja Mamun, 2024. "Macro-Financial Models of Canadian Dollar Interest Rate Swap Yields," Economics Working Paper Archive wp_1072, Levy Economics Institute.

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    More about this item

    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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