González-Fernández, Marcos González-Velasco, Carmen
Year of Publication:
[Journal:] Revista de Métodos Cuantitativos para la Economía y la Empresa [ISSN:] 1886-516X [Volume:] 21 [Year:] 2016 [Pages:] 103-116
The objective of this paper is to classify a group of EMU countries according to the main determinants of long-term sovereign bond yields. We apply the Classification and Regression Tree method (CART). According to the findings, countries with lower inflation, a lower debt to GDP ratio, a lower average income tax rate, higher public debt maturity and higher IPI growth are placed in classification groups that have lower bond yields. These results confirm the hypothesis that countries with better macroeconomic and fiscal indicators have lower sovereign bond yields.
long-term yields sovereign yields classification trees decision trees