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Decomposing Global Yield Curve Co-Movement

Joseph Byrne (), Shuo Cao and Dimitris Korobilis

Essex Finance Centre Working Papers from University of Essex, Essex Business School

Abstract: 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)
Date: 2016-05-17
New Economics Papers: this item is included in nep-fmk and nep-ifn
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Journal Article: Decomposing global yield curve co-movement (2019) Downloads
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