Decomposing global yield curve co-movement

Byrne, J. P., Cao, S. and Korobilis, D. (2019) Decomposing global yield curve co-movement. Journal of Banking and Finance, 106, pp. 500-513. (doi: 10.1016/j.jbankfin.2019.07.018)

Abstract

This paper studies the co-movement of global yield curve dynamics using a Bayesian hierarchical factor model augmented with macroeconomic fundamentals. Our data-driven approach is able to pin down the drivers of yield curve dynamics and produce plausible term premium estimates. We reveal the relative importance of global shocks through two transmission channels: policy and risk channels. Global inflation is the most important core macro fundamental affecting international yields, operating through a policy channel. Two identified global yield factors significantly influence global yield co-movements through a risk channel.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Korompilis Magkas, Professor Dimitris and Byrne, Dr Joseph
• Authors: Byrne, J. P., Cao, S., and Korobilis, D.
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: Journal of Banking and Finance
• Publisher: Elsevier
• ISSN: 0378-4266
• ISSN (Online): 1872-6372
• Published Online: 27 July 2019
• Copyright Holders: Copyright © 2019 Elsevier B.V.
• First Published: First published in Journal of Banking and Finance 106:500-513
• Publisher Policy: Reproduced in accordance with the publisher copyright policy