Yield Curve and Financial Uncertainty: Evidence Based on US Data
Efrem Castelnuovo
Australian Economic Review, 2019, vol. 52, issue 3, 323-335
Abstract:
How do short‐ and long‐term interest rates respond to a jump in financial uncertainty? We address this question by conducting a local projections analysis with US monthly data, period: 1962–2018. The state‐of‐the‐art financial uncertainty measure proposed by Ludvigson, Ma and Ng (2019) is found to predict movements in interest rates at different maturities. In particular, an increase in financial uncertainty is found to trigger a negative and significant response of both short‐ and long‐term interest rates. The response of the short end of the yield curve (i.e., of short‐term interest rates) is found to be stronger than that of the long end (i.e., of long‐term ones). In other words, a financial uncertainty shock causes a temporary steepening of the yield curve. This result is consistent, among other interpretations, with medium‐term expectations of a recovery in real activity after a financial uncertainty shock.
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (7)
Downloads: (external link)
https://doi.org/10.1111/1467-8462.12341
Related works:
Working Paper: Yield Curve and Financial Uncertainty: Evidence Based on US Data (2019) 
Working Paper: Yield curve and financial uncertainty: Evidence based on US data (2019) 
Working Paper: Yield Curve and Financial Uncertainty: Evidence Based on US Data (2019) 
Working Paper: Yield Curve and Financial Uncertainty: Evidence Based on US Data (2019) 
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:bla:ausecr:v:52:y:2019:i:3:p:323-335
Ordering information: This journal article can be ordered from
https://ordering.onl ... 7-8462&ref=1467-8462
Access Statistics for this article
Australian Economic Review is currently edited by John de New, Viet Hoang Nguyen and Susan Méndez
More articles in Australian Economic Review from The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().