Affine Term Structure Models: Forecasting the Yield Curve for Colombia

Velásquez-Giraldo, Mateo; Restrepo-Tobón, Diego A.

doi:10.17533/udea.le.n85a02

Cited by 2 publications

(1 citation statement)

References 20 publications

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“…It also helps in forecasting, as Mankiw and Miron (1986) affirm that the short rate is the opportunity cost of holding money; on the other hand, aggregate-spending decisions are contingent upon the long rate. Moreover, Velásquez-Giraldo and Restrepo-Tobón (2016) argued that a good forecast is essential for security pricing, financial planning, and risk management. Nonetheless, empirical evidence on EH varies as studies provide mixed results.…”

Section: Introductionmentioning

confidence: 99%

A Comparative Analysis of the Expectations Hypothesis of the Term Structure of Interest Rates between the BRICS and G7 Countries

Muzindutsi

Mposelwa

2021

CER

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This paper examines the predictive ability of the expectations hypothesis of the term structure of interest rates in the BRICS and G7 countries by relating each country’s monthly 3‑month Treasury bill rate to 10‑year government bond rates, from May 2003 to May 2018. The panel ARDL model, applying the mean group (MG), pooled mean group (PMG), and dynamic fixed effects (DFE) estimators, is employed to compare the short‑ and long‑run relationships in both groups of countries. The results show that the expectations hypothesis holds in both BRICS and G7 country groups. In the long run, the short‑term interest rate is able to predict the long-term interest rate in both the BRICS and G7 countries. Interest rates in BRICS indicate rapid adjustment back to the long‑run equilibrium, while the adjustment is sluggish in the G7 block. Based on the findings of the study, the sluggish adjustment to the equilibrium in the G7 gives the impression that the financial crisis had an impact on the term structure of interest rates as the G7 countries were directly affected by the crisis.

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Section: Introductionmentioning

confidence: 99%

A Comparative Analysis of the Expectations Hypothesis of the Term Structure of Interest Rates between the BRICS and G7 Countries

Muzindutsi

Mposelwa

2021

CER

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A Segmented and Observable Yield Curve for Colombia

Castro-Iragorri

Peña

Rodríguez

2021

Journal of Central Banking Theory and Practice

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Following (Almeida, Ardison, Kubudi, Simonsen, & Vicente, 2018) we implement a segmented three factor Nelson-Siegel model for the yield curve using daily observable bond prices and short term interbank rates for Colombia. The flexible estimation for each segment (short, medium, and long) provides an improvement over the classical Nelson-Siegel approach in particular in terms of in-sample and out-of-sample forecasting performance. A segmented term structure model based on observable bond prices provides a tool closer to the needs of practitioners in terms of reproducing the market quotes and allowing for independent local shocks in the different segments of the curve.

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Affine Term Structure Models: Forecasting the Yield Curve for Colombia

Cited by 2 publications

References 20 publications

A Comparative Analysis of the Expectations Hypothesis of the Term Structure of Interest Rates between the BRICS and G7 Countries

A Comparative Analysis of the Expectations Hypothesis of the Term Structure of Interest Rates between the BRICS and G7 Countries

A Segmented and Observable Yield Curve for Colombia

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