Decomposing Global Yield Curve Co-Movement
Shuo Cao and
Essex Finance Centre Working Papers from University of Essex, Essex Business School
This paper explains the co-movement of global yield curve dynamics using a Bayesian hierarchical factor model augmented with macro fundamentals. Our novel modeling approach reveals the relative importance of global shocks through two transmission channels: the policy and risk channels. Global inflation is the most important traditional macro fundamentals for international yields and operates through a policy channel. Economic uncertainty and sentiment are also important in driving global yield co-movements, through a risk channel.
Keywords: Global Yield Curves; Co-Movement; Transmission Channels; Global Fundamentals; Sentiment; Economic Uncertainty; Bayesian Factor Model (search for similar items in EconPapers)
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Journal Article: Decomposing global yield curve co-movement (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:esy:uefcwp:18194
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