A macroeconomic model of the term structure of interest rates in Mexico

Arbeitspapier

This paper investigates how different macroeconomic shocks affect the term-structure of interest rates in Mexico. In particular, we develop a model that combines a no-arbitrage specification of the term structure with a macroeconomic model of a small open economy. We find that shocks that are perceived to have a persistent effect on inflation affect the level of the yield curve. The effect on medium and long-term yields results from the increase in expected future short rates and in risk premia. With respect to demand shocks, our results show that a positive shock leads to an upward flattening shift in the yield curve. The flattening of the curve is explained by both the monetary policy response and the time-varying term premia.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers ; No. 2008-10

Classification and Topics

• Classification: Wirtschaft ; Estimation: General ; Interest Rates: Determination, Term Structure, and Effects ; Asset Pricing; Trading Volume; Bond Interest Rates
• Subject: Term-Structure ; No-Arbitrage ; Macroeconomic Shocks ; Zinsstruktur ; Mexiko

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cortés Espada, Josué Fernando ; Ramos-Francia, Manuel
• Event: Veröffentlichung
• (who): Banco de México
• (where): Ciudad de México
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/83742