Estimating and Forecasting the Yield Curve Using a Markov Switching Dynamic Nelson and Siegel Model

Martin Gonzalez-Rozada, Martin Sola, Constantino Hevia and Fabio Spagnolo

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: In this paper we estimate the yield curve of U.S. government bonds using a Markov switching latent variable model. We show how measures such as the level, slope, and curvature of the yield curve are a¤ected by business cycle conditions. We present a switching latent model which not only seem to capture this features in sample but also performs well out of sample.

Keywords: Yield Curve; Term structure of interest rates, Markov regime switching; Maxi- mum likelihood; Risk premium. (search for similar items in EconPapers)
JEL-codes: C13 C22 E43 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2012-07
New Economics Papers: this item is included in nep-for
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Citations: View citations in EconPapers (1)

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https://www.utdt.edu/download.php?fname=_134920718375682100.pdf (application/pdf)

Related works:
Journal Article: Estimating and Forecasting the Yield Curve Using A Markov Switching Dynamic Nelson and Siegel Model (2015)
Working Paper: Estimating and Forecasting the Yield Curve Using a Markov Switching Dynamic Nelson and Siegel Model (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:udt:wpecon:2012-07

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