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On the Transmission Mechanism of Asia-Pacific Yield Curve Characteristics

Sowmya Subramaniam, David Gabauer and Rangan Gupta ()
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Sowmya Subramaniam: Indian Institute of Management Lucknow, India

No 201864, Working Papers from University of Pretoria, Department of Economics

Abstract: This study investigates the transmission mechanism of Asia-Pacific sovereign bond yields. Sovereign bond yields are decomposed into three latent factors (level, slope and curvature) using the Dynamic Nelson Siegel procedure proposed by Diebold and Li (2006). The yield curve transmission mechanism is examined using the time-varying parameter vector autoregressive (TVP-VAR) connectedness approach a la Antonakakis and Gabauer (2017). Findings suggest that the level factor interconnectedness is constantly higher than the interconnectedness of the slope and curvature factor. Notably, the slope factor interconnectedness strongly increased after the Global Financial Crisis (2009) illustrating the increased importance of short-term movements.

Keywords: TVP-VAR; Dynamic Connectedness; Yield Curve Decomposition; Yield Curve Spillovers (search for similar items in EconPapers)
JEL-codes: C32 C5 G12 G15 (search for similar items in EconPapers)
Date: 2018-10
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