A factor model of term structure slopes in eurocurrency markets
This paper departs from previous research in dealing with dimensionality reduction in the space of international term structure slopes. Recent empirical work has documented the existence of information in the slope of the term structure which is relevant to forecast future changes in economic activity, and it is additional to information in past economic activity, inflation, or in any leading indicator index [see Estrella and Hardouvelis (1991), Stock and Watson (1988), Hardouvelis (1994) and Plosser and Rouwenhorst (1994), among others]. This implies that a good forecasting model of term structure slopes could be helpful to anticipate changes in economic activity with an even longer anticipation.
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- Plosser, Charles I. & Geert Rouwenhorst, K., 1994. "International term structures and real economic growth," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 133-155, February.
- Estrella, Arturo & Hardouvelis, Gikas A, 1991.
" The Term Structure as a Predictor of Real Economic Activity,"
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American Finance Association, vol. 46(2), pages 555-76, June.
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- Hagen, Jurgen von & Fratianni, Michele, 1990. "German dominance in the EMS: evidence from interest rates," Journal of International Money and Finance, Elsevier, vol. 9(4), pages 358-375, December.
- Katsimbris, George M & Miller, Stephen M, 1993. "Interest Rate Linkages within the European Monetary System: Further Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(4), pages 771-79, November.
- Karfakis, C. J. & Moschos, D.M., 1990.
"Interest Rate Linkages Within the European Monetary System: A Time Series Analysis,"
144, University of Sydney, School of Economics.
- Karfakis, Costas J & Moschos, Demetrios M, 1990. "Interest Rate Linkages within the European Monetary System: A Time Series Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(3), pages 389-94, August.
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