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Modeling the time-varying volatility of the paper-bill spread

Author

Listed:
  • Malik, Farooq
  • Ewing, Bradley T.
  • Kruse, Jamie B.
  • Lynch, Gerald J.

Abstract

The spread between the rates on commercial paper and Treasury bills has received considerable attention in the literature for its role as an indicator of real economic activity. In this paper we empirically examine what happens when the volatility of the spread changes over time. We estimate a nonlinear model that enables us to discern the asymmetric impact of negative and positive shocks to the spread. We find that a positive shock has a larger impact on the volatility of the spread than does a negative shock.

Suggested Citation

  • Malik, Farooq & Ewing, Bradley T. & Kruse, Jamie B. & Lynch, Gerald J., 2009. "Modeling the time-varying volatility of the paper-bill spread," Journal of Economics and Business, Elsevier, vol. 61(5), pages 404-414, September.
    • Handle: RePEc:eee:jebusi:v:61:y::i:5:p:404-414
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    2. Gerba, Eddie, 2015. "Have the US macro-financial linkages changed? The balance sheet dimension," LSE Research Online Documents on Economics 59886, London School of Economics and Political Science, LSE Library.

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    Keywords

    Paper-bill spread Volatility EGARCH;

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