Interest rate co-movements, global factors and the long end of the term spread

Byrne, J., Fazio, G. and Fiess, N. (2012) Interest rate co-movements, global factors and the long end of the term spread. Journal of Banking and Finance, 36(1), pp. 183-192. (doi: 10.1016/j.jbankfin.2011.07.002)

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Abstract

The decoupling of US short and long interest rates has been a distinctive feature of the 2000s. We employ recent advances in panel econometrics to document this disconnect for industrial countries and link it to a global latent factor in long term rates. We investigate whether international forces, such as global inflation, global output, or the global savings glut may be behind this global latent factor. The savings glut is the most likely contender, suggesting that reserve accumulation and a search for yield from emerging markets has lowered long rates internationally, driving a wedge between domestic short and long rates.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Fiess, Dr Norbert and Byrne, Dr Joseph and Fazio, Dr Giorgio
Authors: Byrne, J., Fazio, G., and Fiess, N.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Banking and Finance
ISSN:0378-4266
Published Online:22 July 2011

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