Modeling the time-varying volatility of the paper-bill spread

Farooq Malik, Bradley T. Ewing, Jamie B. Kruse and Gerald J. Lynch

Journal of Economics and Business, 2009, vol. 61, issue 5, pages 404-414

Abstract: The spread between the rates on commercial paper and Treasury bills has received considerable attention in the literature for its role as an indicator of real economic activity. In this paper we empirically examine what happens when the volatility of the spread changes over time. We estimate a nonlinear model that enables us to discern the asymmetric impact of negative and positive shocks to the spread. We find that a positive shock has a larger impact on the volatility of the spread than does a negative shock.

Keywords: Paper-bill; spread; Volatility; EGARCH (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:jebusi:v:61:y::i:5:p:404-414

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