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Macroeconomic Determinants of the Movement of the Yield Curve

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  • Vargas, Gregorio A.

Abstract

Monetary policy has a significant effect on long-term interest rates and shocks due to inflation and monetary policy have the largest impact on the volatility of long-term interest rates. Long-term interest rates provide significant upward momentum on short-term interest rates and shocks to peso-dollar exchange rate and budget deficit have the strongest impact on the volatility of short-term interest rates. Inflation, peso-dollar exchange rate and non-performing loans significantly drive the medium-term interest rates and shocks due to these are the largest source of volatility for medium-term interest rates.

Suggested Citation

  • Vargas, Gregorio A., 2005. "Macroeconomic Determinants of the Movement of the Yield Curve," MPRA Paper 53117, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:53117
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    References listed on IDEAS

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    Cited by:

    1. Elizondo Rocío, 2023. "The Three Intelligible Factors of the Yield Curve in Mexico," Working Papers 2023-13, Banco de México.
    2. Ákos Máté & Miklós Sebők & Tamás Barczikay, 2021. "The effect of central bank communication on sovereign bond yields: The case of Hungary," PLOS ONE, Public Library of Science, vol. 16(2), pages 1-28, February.

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    More about this item

    Keywords

    yield curve; Nelson-Siegel model; VAR; volatility;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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