An Empirical Analysis of Asymmetries in the Term Structure of Korean Government Bonds (in Korean)

Ki-Ho Kim ()
Additional contact information
Ki-Ho Kim: Micro & Institutional Economics Team, Economic Research Institute, The Bank of Korea

No 2014-12, Working Papers from Economic Research Institute, Bank of Korea

Abstract: The term structure of interest rates is a key information variable, which indicates the movements of future inflation and economic activities. This paper finds that the yields on KGBs (3-month and 3-year Korean Government Bonds) involve asymmetric term structure. While the existing literature on the term structure of interest rates assumes thatcointegrating relationship is symmetric, but empirical results suggest an asymmetric term structure for KGBs. Asymmetric term structure is found in not only the long-run relationship but also short-run error correction mechanism for KGBs. Specifically, the estimated long-run relationship depends on whether or not the long-term rate is rising. Also, an equilibrium is restored swiftly when the yield on 3-year KGBs is falling, but the speed of adjustment is slow when increasing. This finding reflects that central banks may be apt to raise short-term interest rates gradually but lower them quickly in response to recessions or economic crises. This result is consistent with asymmetric central banks’ policy (Enders and Siklos, 2001; Bohl and Siklos, 2004). This paper suggests CCR (Canonical-Cointegrating-Regression based)-CUSUM test and applies the test to the detection of asymmetric cointegrating relationship between KGBs.

Keywords: Canonical Cointegrating Regression; CUSUM Test; Asymmetric Term Structure of Interest Rates (search for similar items in EconPapers)
JEL-codes: C12 C22 E43 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2014-04-29
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.bok.or.kr/ucms/cmmn/file/fileDown.do?m ... 00000105785&fileSn=1 Working Paper, 2014 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bok:wpaper:1412

Access Statistics for this paper

More papers in Working Papers from Economic Research Institute, Bank of Korea Contact information at EDIRC.
Bibliographic data for series maintained by Economic Research Institute ().