Short and Long-run Behaviour of Long-term Sovereign Bond Yields

Antonio Afonso and Christophe Rault

No 2010/19, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: This study assesses the short and long-run behaviour of long-term sovereign bond yields in OECD countries, for the period 1973-2008. We employ a dynamic panel approach to reflect financial and economic integration, and to increase the performance and accuracy of the tests. Given the existence of cross-country dependence regarding sovereign yields and its determinants, we resort to simulation and bootstrap methods for the analysis. Results based on the Common Correlated Effect estimator of Pesaran (2006) and on Panel Error Correction Models to sort out short- and long-run fiscal developments show that in addition to common movements in sovereign yields, investors also consider country differences arising from specific factors (inflation, budgetary and current account imbalances, real effective exchange rates, and liquidity).

Keywords: long-term yields; EU; financial integration; panel cointegration; bootstrap. (search for similar items in EconPapers)
JEL-codes: C23 E43 E62 G15 H62 (search for similar items in EconPapers)
Date: 2010-11
New Economics Papers: this item is included in nep-cba and nep-cmp
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Short- and long-run behaviour of long-term sovereign bond yields (2015)
Working Paper: Short and Long-run Behaviour of Long-term Sovereign Bond Yields (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp192010

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