Global Yield Curve Dynamics and Interactions: A Dynamic Nelson-Siegel Approach

Francis Diebold (), Canlin Li () and Vivian Yue ()
Additional contact information
Canlin Li: Graduate School of Management, University of California, Riverside
Vivian Yue: Department of Economics, New York University

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: The popular Nelson-Siegel (1987) yield curve is routinely fit to cross sections of intra-country bond yields, and Diebold and Li (2006) have recently proposed a dynamized version. In this paper we extend Diebold-Li to a global context, modeling a potentially large set of country yield curves in a framework that allows for both global and country-specific factors. In an empirical analysis of term structures of government bond yields for the Germany, Japan, the U.K. and the U.S., we find that global yield factors do indeed exist and are economically important, generally explaining significant fractions of country yield curve dynamics, with interesting differences across countries.

Keywords: Term Structure; Interest Rate; Dynamic Factor Model; Global Yield; World Yield; Bond Market (search for similar items in EconPapers)
JEL-codes: G1 E4 C5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-fmk, nep-mac and nep-mon
Date: 2007-05-30

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http://economics.sas.upenn.edu/system/files/07-030.pdf (application/pdf)

Related works:
Working Paper: Global Yield Curve Dynamics and Interactions: A Dynamic Nelson-Siegel Approach (2007)
Journal Article: Global yield curve dynamics and interactions: A dynamic Nelson-Siegel approach (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:pen:papers:07-030

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