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The Interaction between Yield Curve and Macroeconomic Factors

Oguzhan Cepni, Ibrahim Ethem Guney, Doruk Küçüksaraç and Muhammed Hasan Yilmaz

CBT Research Notes in Economics from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: [EN] Understanding the determinants of yield curve and its interaction with economic variables is quite crucial for both policymakers and investors. This note aims to explore the relation between yield curve and macroeconomic factors. To this end, firstly, the yield curve is depicted by a small number of unobservable factors, namely the level, slope and curvature, using Nelson-Siegel methodology for the 2006:02-2017:08 period. Rather than combining the yield curve factors with a few macroeconomic variables, a comprehensive dataset is set used, which is comprised of 164 global and domestic macroeconomic/financial variables. The principal components obtained under four categories (global variables, inflation, domestic financial variables, and economic activity) are incorporated into a Vector Autoregressive model together with the yield curve factors. Empirical results suggest that the level factor responds to shocks originated from inflation, domestic financial variables and global variables. Furthermore, the slope factor is affected by shocks in global variables, and the curvature factor appears to be influenced by domestic financial developments. Overall, the results indicate the significance of macroeconomic information on the yield curve, especially of domestic financial variables and global variables. Given the spillover effects of unconventional monetary policies of advanced countries, emerging market bond rates tend to be exposed to the swings in the global financial conditions, which weakens the monetary policy transmission in emerging countries. [TR] [TR] Getiri egrisinin belirleyicilerinin ve iktisadi degiskenlerle olan etkilesiminin anlasilmasi politika yapicilar ve yatirimcilar icin onem tasimaktadir. Bu notta, getiri egrisi ve makroekonomik faktorler arasindaki dinamik iliski incelenmektedir. Bu amacla ilk asamada getiri egrisi, 2006:02- 2017:08 donemi icin Nelson-Siegel yontemi kullanilarak seviye, egim ve egrilik faktorleri uzerinden ozetlenmistir. Uygulamada yaygin metot olan getiri egrisinin birkac makroekonomik gostergeyle iliskilendirilmesi yerine, kuresel ve yerel makroekonomik/finansal 164 seriyi iceren bir veri seti kullanilmistir. Getiri egrisi faktorleri ve dort sektorden elde edilen temel bilesenler arasinda vektor ozbaglanim analizi gerceklestirilmistir. Ampirik sonuclar, seviye faktorunun enflasyon gelismeleri, yerel finansal degiskenler ile kuresel degiskenlerden etkilendigine isaret etmektedir. Ek olarak, egim faktoru kuresel degiskenlerden, egrilik faktoru ise yerel finansal gelismelerden etkilenmektedir. Ozetle, sonuclar kuresel finansal degiskenler basta olmak uzere, makroekonomik degiskenlerin getiri egrisini onemli derecede etkiledigine isaret etmektedir. Geleneksel-olmayan para politikasi uygulamalarinin bulasicilik etkisi dikkate alindiginda, gelismekte olan ulke tahvil faizlerinin kuresel kosullardaki degisimlere duyarli oldugu ve bu durumun para politikasi aktarim mekanizmasini azalttigi gorulmektedir.

Date: 2018
New Economics Papers: this item is included in nep-ara, nep-mac and nep-mon
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Handle: RePEc:tcb:econot:1802