Interest Rate Co-movements, Global Factors and the Long End of the Term Spread

Joseph Byrne, Giorgio Fazio and Norbert Fiess

No 2010-24, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: The disconnect between rising short and low long interest rates has been a distinctive feature of the 2000s. Both research and policy circles have argued that international forces, such as global monetary policy (e.g. Rogoff, 2006); international business cycles (e.g. Borio and Filardo, 2007); or a global savings glut (e.g Bernanke, 2005) may be responsible. In this paper, we employ recent advances in panel data econometrics to document the disconnect and link it explicitly to the existence of a global latent factor that dominates the long end of the term spread for the recent period; the saving glut story emerges as the most likely contender for the global factor.

Keywords: Short and Long Interest Rates; Financial Globalization; Panel Data; Factor Models (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Interest rate co-movements, global factors and the long end of the term spread (2012)
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:edn:sirdps:156

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