U.S. Dollar Swap Yields: An Analysis of the Dynamics of Monthly Changes

Tanweer Akram and Khawaja Mamun

Journal of Economic Issues, 2023, vol. 57, issue 2, 522-531

Abstract: John Maynard Keynes asserted that the central bank sways the long-term interest rate through the influence of its policy rate on the short-term interest rate. Recent empirical research shows that Keynes’s conjecture holds for long-term Treasury yields in the United States. This article investigates whether Keynes’s claim also holds for the monthly changes in U.S.-dollar-denominated long-term swap yields by econometrically modeling its dynamics using an autoregressive distributed lag (ARDL) approach. The econometric modeling reveals that there is a statistically significant effect of the monthly changes in the Treasury bill rate on the monthly changes in swap yields of different maturity tenors after controlling for a host of macroeconomic and financial control variables. The findings from the econometric models that are estimated render a perspicacious Keynesian perspective on key policy questions and contemporary debates in macroeconomics and finance.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:mes:jeciss:v:57:y:2023:i:2:p:522-531

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DOI: 10.1080/00213624.2023.2201797

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