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Bond Markets and Macroeconomic Performance

Author

Listed:
  • Guglielmo Maria Caporale

    (South Bank University, London)

  • Geoffrey Williams

    (Oxford University, UK)

Abstract

This paper presents some empirical evidence on the relationship between the yield curve and macroeconomic variables in the G7. The econometric methodology followed takes into account stationarity, cointegration and exogeneity features of the data, which is typically not done in the existing literature, resulting in invalid statistical inference. The Phillips-Hansen fully modified estimator delivers well specified equations, which confirm the importance of fiscal and monetary developments in the determination of both long- and short-term interest rates. The results are consistent with an IS-LM/loanable funds framework, and have implications for the likelihood of alternative EMU scenarios under different policy assumptions.

Suggested Citation

  • Guglielmo Maria Caporale & Geoffrey Williams, 2001. "Bond Markets and Macroeconomic Performance," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 4(1), pages 27-44, May.
    • Handle: RePEc:zag:zirebs:v:4:y:2001:i:1:p:27-44
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    Citations

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    Cited by:

    1. Andres Vesilind, 2003. "Application Of Fundamental Models To Money And Exchange Rate Markets," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 22, Faculty of Economics and Business Administration, University of Tartu (Estonia).

    More about this item

    Keywords

    Causality; Cointegration; Exogeneity; Phillips-Hansen Fully Modified Estimator; Yield Curve;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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