The Czech Government Yield Curve Decomposition at the Lower Bound

The term structure of yields is an important source of information on market expectations about future macroeconomic developments and investors' risk perceptions and preferences. This article presents the decomposition of the Czech government bond yield curve into its components using a shadow-...

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Bibliographic Details
Published inFinance a úvěr Vol. 69; no. 1; pp. 2 - 36
Main Authors Kučera, Adam, Dvořák, Michal, Komárková, Zlatuše
Format Journal Article
LanguageEnglish
Published Prague Charles University, Faculty of Social Sciences 01.01.2019
Subjects
Asymmetry
Central banks
Credit risk
Decomposition
Economic models
Federal funds rate
Federal Reserve monetary policy
Government bonds
Greenspan, Alan
Hypotheses
Interest rates
International finance
Macroeconomics
Regression analysis
Risk premiums
Yield
Yield curve
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Summary:The term structure of yields is an important source of information on market expectations about future macroeconomic developments and investors' risk perceptions and preferences. This article presents the decomposition of the Czech government bond yield curve into its components using a shadow-rate affine term-structure model and interest rate and credit default swap quotations. The evolution of the components is interpreted in relation to the macro-financial environment embodied by selected variables. The practical use of the decomposition in estimating and interpreting responses of the Czech government bond yield curve to macroeconomic and financial shock is presented using a vector autoregression model. Finally, the results are evaluated in terms of the lower bound proximity.
ISSN:0015-1920
2464-7683