US and EA yield curve persistence during the COVID-19 pandemic

Fotis Papailias

Finance Research Letters, 2022, vol. 44, issue C

Abstract: This paper investigates changes in persistence caused by the COVID-19 pandemic in the US and EA yield curves. We extract the long-term, short-term and medium-term factors and proxy the persistence by estimating the autoregressive coefficient of each factor. To examine the time-varying effects, we employ a local linear estimation. Our findings suggest that, during the first phases of the pandemic, the US long-term and short-term factors exhibited explosive behaviour while, at the same time, the EA factors diminished in persistence, making the EA yield curve more predictable even though the EA countries were hit by the pandemic somewhat earlier than the US.

Keywords: Term structure; Yield curve; Nelson-siegel; Coronavirus; COVID-19; Time-varying coefficient models; Autoregressive processes; US; Euro-area (search for similar items in EconPapers)
JEL-codes: C22 C58 G12 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001689

DOI: 10.1016/j.frl.2021.102087

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