Macrofinance Model of the Czech Economy: Asset Allocation Perspective

International Monetary Fund

No 2012/078, IMF Working Papers from International Monetary Fund

Abstract: The paper developes a VAR macrofinance model of the Czech economy. It shows that yield misalignments from the yields implied by the macrofinance model partially determine subsequent yield changes over three to nine months. These yield misalignments tend to persist for a number of months. This persistence of the misalignments was explained by (a) the fact that the macro-economy influences asset markets only at lower frequencies, (b) the liquidity effect particularly during the times of capital inflows to Czech Republic, and (c) the fact that not all misalignments were greater than their historical one standard deviation.

Keywords: WP; fair value; yield change; investment purpose; finance model; inflation rate; slope factor; yield curve modeling; macrofinance modeling; vector auto-regression model; Yield curve; Sovereign bonds; Industrial production; Inflation; Stock markets; Global (search for similar items in EconPapers)
Pages: 49
Date: 2012-03-01
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