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Level, slope, curvature of the sovereign yield curve, and fiscal behaviour
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Resumo(s)
We study fiscal behaviour and the sovereign yield curve in the US and Germany. We obtain the latent
factors, level, slope and curvature, with the Kalman filter, and use them in a VAR with macro, fiscal
and financial stress variables. In the US, fiscal shocks generate an immediate response of the short-end
of the yield curve, associated with monetary policy, lasting 6–8 quarters, followed by a response of the
whole yield curve lasting 3 years, with an implied elasticity of long-term yields of 80% for the government
debt shock and 48% for the budget balance shock. In Germany, fiscal shocks have entailed no significant
reactions of the yield curve shape and no response of the monetary policy interest rate, notably after
1999; only in the case of debt shocks there is a short-lived decrease in the medium-end of the yield curve
in the following 2nd and 3rd quarters.
Descrição
Palavras-chave
Yield Curve Fiscal Policy Financial Markets
Contexto Educativo
Citação
Afonso, António and Manuel M.F. Martins.(2012). "Level, slope, curvature of the sovereign yield curve, and fiscal behaviour". Journal of Banking & Finance, Vol.36, No. 6: pp. 1789-1807.
Editora
Elsevier