Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/202563
Authors: 
Clostermann, Jörg
Seitz, Franz
Year of Publication: 
2005
Series/Report no.: 
Arbeitsberichte - Working Papers 11
Abstract: 
In the present paper we analyse whether fundamental macroeconomic factors, temporary influences or more structural factors have contributed to the recent decline in bond yields in the US. For that purpose, we start with a very general model of interest rate determination in which risk premia are captured via the macroeconomic (policy) environment. The empirical part consists of a cointegration analysis with an error correction mechanism from the mid 80s until 2005. We are able to establish a stable long-run relationship and find that the behaviour of bond rates in the last few years may well be explained by macroeconomic factors. These are driven by core price developments, monetary policy reflected in short-term interest rates and the business cycle. A changed structural demand for bonds does not seem to be at work. The existing overestimation of bond yields is not unusual historically. Finally, our bond yield equation outperforms a random walk model in different out-of-sample exercises.
Subjects: 
bond yields
interest rates
cointegration
inflation
forecasting
JEL: 
C32
E43
E47
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/3.0/de/
Document Type: 
Working Paper

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