Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/238634 
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 944
Publisher: 
Levy Economics Institute of Bard College, Annandale-on-Hudson, NY
Abstract: 
Keynes argued that the short-term interest rate is the main driver of the long-term interest rate. This paper empirically models the relationship between short-term interest rates and long-term government securities yields in Canada, after controlling for other important financial variables. The statistical analysis uses high-frequency daily data from 1990 to 2018. It applies both the cointegration technique and Granger causality within the vector error correction (VEC) framework. The empirical results suggest that the action of the monetary authority is an important determinant of Canadian government securities yields, which supports the Keynesian perspective. These findings have important implications for investors, financial analysts, and policymakers.
Subjects: 
Canadian Government Bond Yields
Long-Term Interest Rate
Short-TermInterest Rate
Monetary Policy
Cointegration
Granger Causality
JEL: 
E43
E50
E60
G10
G12
Document Type: 
Working Paper

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