Macroeconomic Determinants of the Movement of the Yield Curve

Gregorio Vargas

MPRA Paper from University Library of Munich, Germany

Abstract: Monetary policy has a significant effect on long-term interest rates and shocks due to inflation and monetary policy have the largest impact on the volatility of long-term interest rates. Long-term interest rates provide significant upward momentum on short-term interest rates and shocks to peso-dollar exchange rate and budget deficit have the strongest impact on the volatility of short-term interest rates. Inflation, peso-dollar exchange rate and non-performing loans significantly drive the medium-term interest rates and shocks due to these are the largest source of volatility for medium-term interest rates.

Keywords: yield curve; Nelson-Siegel model; VAR; volatility (search for similar items in EconPapers)
JEL-codes: E43 E52 (search for similar items in EconPapers)
Date: 2005-03
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Citations: View citations in EconPapers (2)

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