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The Empirics of Canadian Government Securities Yields

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  • Tanweer Akram
  • Anupam Das

Abstract

Keynes argued that the short-term interest rate is the main driver of the long-term interest rate. This paper empirically models the relationship between short-term interest rates and long-term government securities yields in Canada, after controlling for other important financial variables. The statistical analysis uses high-frequency daily data from 1990 to 2018. It applies both the cointegration technique and Granger causality within the vector error correction (VEC) framework. The empirical results suggest that the action of the monetary authority is an important determinant of Canadian government securities yields, which supports the Keynesian perspective. These findings have important implications for investors, financial analysts, and policymakers.

Suggested Citation

  • Tanweer Akram & Anupam Das, 2020. "The Empirics of Canadian Government Securities Yields," Economics Working Paper Archive wp_944, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_944
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    References listed on IDEAS

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    More about this item

    Keywords

    Canadian Government Bond Yields; Long-Term Interest Rate; Short-Term Interest Rate; Monetary Policy; Cointegration; Granger Causality;
    All these keywords.

    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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