Explaining the US bond yield conundrum

Arbeitspapier

We analyze if and to what extent fundamental macroeconomic factors, temporary influences or more structural factors have contributed to the low levels of US bond yields over the last few years. For that purpose, we start with a general model of interest rate determination. The empirical part consists of a cointegration analysis with an error correction mechanism. We are able to establish a stable long-run relationship and find that the behavior of bond yields, even during the last two years, can well be explained. Alongside the more traditional macroeconomic determinants like core inflation, monetary policy and the business cycle, we also include foreign holdings of US Treasuries. The latter should capture the frequently mentioned structural effects on long-term interest rates. Finally, our bond yield equation outperforms a random walk model in different forecasting exercises.

Object Details

• ISBN: 3-937804-02-1
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Weidener Diskussionspapiere ; No. 2

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Interest Rates: Determination, Term Structure, and Effects ; Money and Interest Rates: Forecasting and Simulation: Models and Applications
• Subject: bond yields ; interest rates ; cointegration ; inflation ; forecasting ; Rendite ; Zins ; Öffentliche Anleihe ; Prognoseverfahren ; Inflation ; Schätzung ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bandholz, Harm ; Clostermann, Jörg ; Seitz, Franz
• Event: Veröffentlichung
• (who): Fachhochschule Amberg-Weiden
• (where): Weiden i.d.OPf.
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/56484
• Last update: 10.03.2025, 11:46 AM CET