Do local and global factors impact the emerging markets' sovereign yield curves? Evidence from a data‐rich environment

Abstract

This paper investigates the relation between yield curve and macroeconomic factors for 10 emerging sovereign bond markets using the sample from January 2006 to April 2019. To this end, the diffusion indices obtained under four categories (global variables, inflation, domestic financial variables, and economic activity) are incorporated by estimating dynamic panel data regressions together with the yield curve factors. Besides, in order to capture dynamic interaction between yield curve and macroeconomic/financial factors, a panel vector autoregressive (VAR) analysis based on the system generalized method of moments (GMM) approach is utilized. Empirical results suggest that the level factor responds to shocks originated from inflation, domestic financial variables, and global variables. Furthermore, the slope factor is affected by shocks in global variables, and the curvature factor appears to be influenced by domestic financial variables. We also show that macroeconomic/financial factors captures significant predictive information over yield curve factors by running individual country factor-augmented predictive regressions and variable selection algorithms such ridge regression, least absolute shrinkage operator (LASSO), and Elastic Net. Our findings have important implications for policymakers and fund managers by explaining the underlying forces of movements in the yield curve and forecasting accurately dynamics of yield curve factors.

Forecasting the different influencing factors of household food waste behavior in China under the COVID‐19 pandemic

“…Most of the studies of food waste primarily addressed issues that happened in developed countries (Garnett, 2011; Jörissen et al, 2015; Qian et al, 2020), while much less attention has been given to developing countries or emerging economies, such as China. Benefited from the double‐digit annual high‐speed economic growth since reform and opening‐up policy in the late 1970s, China has become the most important emerging economy in the world (Cepni et al, 2021). In the transition from a developing agricultural country to a developed industrial country and economic development and improvement of people's living standards, Chinese people's attitudes of consumption and behavior patterns have undergone profound changes.…”

Monetary Policy Spillovers – The Impact of Advanced Central Banks’ Decisions on Emerging Financial Markets

“…Contrary to previous articles, they argued that the share of international investors may not be directly linked to yields, suggesting the existence of threshold-type or largely country-specific relationships. (Konopczak & Konopczak, 2017) Cepni et al (2021 identified that both global and local factors contribute to changes in yield curves in emerging markets, limiting the transmission of monetary policy in these countries. They found that the level of yields is associated with inflation or other financial variables, while curvature is influenced by local financial factors, and slope is mostly affected by global variables.…”

“…They found that the level of yields is associated with inflation or other financial variables, while curvature is influenced by local financial factors, and slope is mostly affected by global variables. (Cepni, Guney, Kucuksarac, & Hasan Yilmaz, 2021) As emphasized multiple times, the heterogeneity of emerging markets is evident in their diverse responses to external shocks. This diversity influences domestic interest rates, bond yields, and overall funding costs, as explored in the reviewed papers.…”