 Explaining long-term bond yields synchronization dynamics in EuropeJesus Crespo Cuaresma and Oscar Fernández Economic Modelling, 2024, vol. 133, issue C Abstract: We present a novel empirical assessment of the determinants of sovereign yield synchronization dynamics in the European Monetary Union. This topic has been seldom addressed in the existing macroeconometric literature. We use a time-varying measure of government bond yields synchronization and Bayesian Model Averaging methods to show that the persistence of synchronization measures differs significantly between GIIPS countries (Greece, Ireland, Italy, Portugal and Spain) and the rest of the monetary union, as well as across periods characterized by whether the zero lower bound of interest rates was binding or not. The degree of synchronization in inflation rates with the rest of the currency area is a robust predictor of the synchronization of sovereign yields, as opposed to economic fundamentals describing the fiscal positions of individual countries. An out-of-sample forecasting exercise reveals that accounting for the most relevant economic fundamentals can lead to improvements in the directional accuracy of the forecasts of yield synchronization rates for GIIPS countries. Keywords: Long-term government bond yields; European monetary union; Synchronization measures; Bayesian model averaging (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:133:y:2024:i:c:s0264999324000403 DOI: 10.1016/j.econmod.2024.106684 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.