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Macroeconomic Determinants of the Interest Rate Term Structure: A Svensson Model Analysis

Author

Listed:
  • Cristiane Benetti

    (Finance Department, ICN Business School, CEREFIGE, Université de Lorraine, 54000 Nancy, France)

  • José Monteiro Varanda Neto

    (Banco do Nordeste do Brasil, Fortaleza 60743902, Brazil)

  • Rogério Mori

    (Economics Department, FGV EESP, Sao Paulo 01313020, Brazil)

Abstract

This study develops a model to predict and explain short-term fluctuations in the Brazilian local currency interest rate term structure. The model relies on the potential relationship between these movements and key macroeconomic factors. The methodology consists of two stages. First, the Svensson model is applied to fit the daily yield curve data. This involves maximizing the R 2 statistic in an OLS regression, following the Nelson–Siegel approach. The median decay parameters are then fixed for subsequent estimations. In the second stage, with the daily yield curve estimates in hand, another OLS regression is conducted. This regression incorporates the idea that Svensson’s betas are influenced by macroeconomic variables.

Suggested Citation

  • Cristiane Benetti & José Monteiro Varanda Neto & Rogério Mori, 2025. "Macroeconomic Determinants of the Interest Rate Term Structure: A Svensson Model Analysis," Economies, MDPI, vol. 13(4), pages 1-21, April.
    • Handle: RePEc:gam:jecomi:v:13:y:2025:i:4:p:108-:d:1634862
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