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Economic Fundamentals and Spill-over among Asian Term Structures

Wachirawat Banchuen
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Wachirawat Banchuen: Bank of Thailand

PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research

Abstract: This paper estimates affine term structure models of government bonds in selected 5 emerging countries during 2002-2015 periods. It aims to study the relationship between sovereign bond markets and the real economy. The analysis confirms evidences earlier that macroeconomic variables help explaining yield curve and term premium dynamics. For short-term bonds, yield's responses to shocks are mostly carried by policy channel. For long-term bonds, responses are mostly from term premium. Furthermore, there are external factors that could generate yields co-movement in some emerging-economy countries. Our findings therefore suggest that portfolio diversification would benefit investors who allocate their assets globally. Central banks, however, have to face with difficulties in managing bond market as they have to oversee risk factors affecting investors' risk perception and causing cross-country spill-over effects.

Keywords: Term Structure Model; Term Premium; spillover (search for similar items in EconPapers)
JEL-codes: E43 E52 E44 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2017-01, Revised 2017-01
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