An Empirical Analysis of the Mexican Term Structure of Interest Rates

Cortés Espada Josué Fernando, Manuel Ramos Francia and Torres García Alberto

No 2008-07, Working Papers from Banco de México

Abstract: We study the dynamics of the term-structure of interest rates in Mexico. Specifically, we investigate time variation in bond risk premia and the common factors that have influenced the behavior of the yield curve. We find that term-premia in government bonds appear to be time-varying. We then estimate a principal components model. We find that over 95% of the total variation in the yield curve can be explained by two factors. The first factor captures movements in the level of the yield curve, while the second one captures movements in the slope. Moreover, we find that the level factor is positively correlated with measures of long-term inflation expectations and that the slope factor is negatively correlated with the overnight interest rate.

JEL-codes: C13 E43 G12 (search for similar items in EconPapers)
Date: 2008-07
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: An empirical analysis of the mexican term structure of interest rates (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bdm:wpaper:2008-07

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