Mildly Explosive Dynamics in U.S. Fixed Income Markets

Silvio Contessi, Pierangelo De Pace and Massimo Guidolin

No 324, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: We use a recently developed right-tail variation of the Augmented Dickey-Fuller unit root test to identify and date-stamp periods of mildly explosive behavior in the weekly time series of seven U.S. fixed income yield spreads between September 2002 and January 2015. We find statistically significant evidence of such behavior in six of these spreads. Mild explosivity migrates from short-term funding markets to more volatile medium- and long-term markets during the Great Financial Crisis. For some markets, we statistically validate the conjecture, originally suggested by Gorton (2009a,b), that the financial panic of 2007 initially migrated from segments of the ABX market to other U.S. fixed income markets.

Keywords: Finance; investment analysis; fixed-income markets; yield spreads; mildly explosive behavior (search for similar items in EconPapers)
JEL-codes: C44 C58 G01 G12 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2017-08-01
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Citations: View citations in EconPapers (1)

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https://www.dallasfed.org/-/media/documents/institute/wpapers/2017/0324r1.pdf Revised paper (application/pdf)
https://www.dallasfed.org/~/media/documents/institute/wpapers/2017/0324.pdf Original paper (application/pdf)

Related works:
Journal Article: Mildly explosive dynamics in U.S. fixed income markets (2020)
Working Paper: Mildly Explosive Dynamics in U.S. Fixed Income Markets (2020)
Working Paper: Mildly Explosive Dynamics in U.S. Fixed Income Markets (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:324

DOI: 10.24149/gwp324r1

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