Interest rate co-movements, global factors and the long end of the term spread

Joseph Byrne, Giorgio Fazio and Norbert Fiess

Journal of Banking & Finance, 2012, vol. 36, issue 1, 183-192

Abstract: The decoupling of US short and long interest rates has been a distinctive feature of the 2000s. We employ recent advances in panel econometrics to document this disconnect for industrial countries and link it to a global latent factor in long term rates. We investigate whether international forces, such as global inflation, global output, or the global savings glut may be behind this global latent factor. The savings glut is the most likely contender, suggesting that reserve accumulation and a search for yield from emerging markets has lowered long rates internationally, driving a wedge between domestic short and long rates.

Keywords: Short interest rates; Long interest rates; Financial globalization; Panel data; Factor models (search for similar items in EconPapers)
JEL-codes: C33 E43 F01 F36 G15 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Interest Rate Co-movements, Global Factors and the Long End of the Term Spread (2010)
Working Paper: Interest Rate Co-movements, Global Factors and the Long End of the Term Spread (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:1:p:183-192

DOI: 10.1016/j.jbankfin.2011.07.002

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