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Global Yield Curves and Sovereign Bond Market Integration

  • ZHU Xiaoneng

    (Division of Economics,School of Humanities and Social Sciences, Nanyang Technological University, Singapore)

  • Shahidur RAHMAN

    (Nanyang Technological University, Singapore)

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    We extract global yield curve factors based on the affine arbitrage-free dynamic Nelson-Siegel model. The measure of integration proposed in the paper allows time-varying partial segmentation of national and global government bond markets. It takes into account the maturity structure of yields, therefore it is consistent in time series and cross-section as well. Though global factors and country-specific factors are highly correlated, the international bond market is less integrated than one might expected based on correlation analysis or prior knowledge of investment restrictions. The difference stems from 1) the integration asymmetry of factors:level factor is more integrated than slope and curvature factors; 2) heterogeneous factors dynamics: one factors integration may accompany the segmentation of other factors. Yet the expected integration is stable over the last two decades.

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    File URL: http://www3.ntu.edu.sg/hss2/egc/wp/2009/2009-02.pdf
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    Paper provided by Nanyang Technological University, School of Humanities and Social Sciences, Economic Growth Centre in its series Economic Growth Centre Working Paper Series with number 0902.

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    Length: 56 pages
    Date of creation: Feb 2009
    Date of revision:
    Handle: RePEc:nan:wpaper:0902
    Contact details of provider: Postal: Nanyang Drive, Singapore 637332
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    Web page: http://egc.hss.ntu.edu.sg/

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