Decomposing global yield curve co-movement

Joseph Byrne, Shuo Cao and Dimitris Korobilis

Journal of Banking & Finance, 2019, vol. 106, issue C, 500-513

Abstract: This paper studies the co-movement of global yield curve dynamics using a Bayesian hierarchical factor model augmented with macroeconomic fundamentals. Our data-driven approach is able to pin down the drivers of yield curve dynamics and produce plausible term premium estimates. We reveal the relative importance of global shocks through two transmission channels: policy and risk channels. Global inflation is the most important core macro fundamental affecting international yields, operating through a policy channel. Two identified global yield factors significantly influence global yield co-movements through a risk channel.

Keywords: Global yield curves; Co-movement; Transmission channels; Global macro fundamentals; Global latent factors; Bayesian factor model (search for similar items in EconPapers)
JEL-codes: C11 C32 E43 F3 G12 G15 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Decomposing Global Yield Curve Co-Movement (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:106:y:2019:i:c:p:500-513

DOI: 10.1016/j.jbankfin.2019.07.018

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