 International linkages of term structures: US and Korea Treasury bond yieldsJaeho Yun Journal of International Money and Finance, 2023, vol. 138, issue C Abstract: This study analyzes the international linkages of term structures between the United States (US) and Korea using a Gaussian dynamic term structure model. The empirical analysis shows that the US level factor makes the most important contribution to the Korean term structure fluctuations. When two separate channels (i.e., policy and risk-compensation) are considered for propagating structural shocks into Korean bond yields, the policy channel dominates for the short-term rates, whereas for the long-term yield, the policy channel is dominant for the US level shock, but the risk channel is dominant for other shocks. These results are sensitive to whether or not small-sample bias is corrected. With a help of the bias correction, term premium estimates in the US and Korea exhibit substantial countercyclicality with respect to the US output gap. The US slope factor, which also has a significant impact on Korean long-term yields, is closely related to the global liquidity conditions for Korean bond returns. Keywords: International linkages of term structures; Gaussian dynamic term structure model; US level factor; Policy and risk-compensation channels; Global liquidity (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:jimfin:v:138:y:2023:i:c:s0261560623001250 DOI: 10.1016/j.jimonfin.2023.102924 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance 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.