TY - JOUR
T1 - Interest rate co-movements, global factors and the long end of the term spread
AU - Byrne, Joseph P.
AU - Fazio, Giorgio
AU - Fiess, Norbert
PY - 2012/1/31
Y1 - 2012/1/31
N2 - The decoupling of US short and long interest rates has been a distinctive feature of the 2000s. We employ recent advances in panel econometrics to document this disconnect for industrial countries and link it to a global latent factor in long term rates. We investigate whether international forces, such as global inflation, global output, or the global savings glut may be behind this global latent factor. The savings glut is the most likely contender, suggesting that reserve accumulation and a search for yield from emerging markets has lowered long rates internationally, driving a wedge between domestic short and long rates.
AB - The decoupling of US short and long interest rates has been a distinctive feature of the 2000s. We employ recent advances in panel econometrics to document this disconnect for industrial countries and link it to a global latent factor in long term rates. We investigate whether international forces, such as global inflation, global output, or the global savings glut may be behind this global latent factor. The savings glut is the most likely contender, suggesting that reserve accumulation and a search for yield from emerging markets has lowered long rates internationally, driving a wedge between domestic short and long rates.
KW - factor models
KW - financial globalization
KW - long interest rates
KW - panel data
KW - short interest rates
UR - http://www.scopus.com/inward/record.url?scp=80655127779&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2011.07.002
DO - 10.1016/j.jbankfin.2011.07.002
M3 - Article
AN - SCOPUS:80655127779
SN - 0378-4266
VL - 36
SP - 183
EP - 192
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 1
ER -