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)

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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
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
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

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