6533b825fe1ef96bd128322c

RESEARCH PRODUCT

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

Joseph P. ByrneNorbert FiessNorbert FiessGiorgio FazioGiorgio Fazio

subject

InflationEconomics and Econometricsmedia_common.quotation_subjectYield (finance)jel:E43Short interest rates Long interest rateInternational economicsjel:C33Short and Long Interest Rates Financial Globalization Panel Data Factor Modelsjel:F36Factor modelsHGjel:F01Term (time)Interest ratejel:G15EconomicsEmerging marketsFinanceFinancial globalizationPanel dataPanel dataFactor analysismedia_commonFinancial globalization

description

The disconnect between rising short and low long interest rates has been a distinctive feature of the 2000s. Both research and policy circles have argued that international forces, such as global monetary policy (e.g. Rogoff, 2006); international business cycles (e.g. Borio and Filardo, 2007); or a global savings glut (e.g Bernanke, 2005) may be responsible. In this paper, we employ recent advances in panel data econometrics to document the disconnect and link it explicitly to the existence of a global latent factor that dominates the long end of the term spread for the recent period; the saving glut story emerges as the most likely contender for the global factor.

yearjournalcountryeditionlanguage
2012-01-01Journal of Banking & Finance
https://doi.org/10.1016/j.jbankfin.2011.07.002