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The Dynamics of the Term Structure of Interest Rates in the United States in Light of the Financial Crisis of 2007–10

Author

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  • Mr. Marco Rodriguez Waldo
  • Mr. Carlos I. Medeiros

Abstract

This paper assesses the dynamics of the term structure of interest rates in the United States in light of the financial crisis in 2007-10. In particular, this paper assesses the dynamics of the term structure of U.S. Treasury security yields in light of economic and financial events and the monetary policy response since the inception of the crisis in mid-2007. To this end, this paper relies on estimates of the term structure using Nelson-Siegel models that make use of unobservable or latent factors and macroeconomic variables. The paper concludes that both the latent factors and macroeconomic variables explain the dynamics of the term structure of interest rates, and the expectations of the impact on macroeconomic variables of changes in financial factors, and vice versa, have changed little with the financial crisis.

Suggested Citation

  • Mr. Marco Rodriguez Waldo & Mr. Carlos I. Medeiros, 2011. "The Dynamics of the Term Structure of Interest Rates in the United States in Light of the Financial Crisis of 2007–10," IMF Working Papers 2011/084, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2011/084
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    Citations

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    Cited by:

    1. Paccagnini, Alessia, 2016. "The macroeconomic determinants of the US term structure during the Great Moderation," Economic Modelling, Elsevier, vol. 52(PA), pages 216-225.
    2. Choudhry, Taufiq, 2016. "Time-varying risk premium yield spread effect in term structure and global financial crisis: Evidence from Europe," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 303-311.
    3. International Monetary Fund, 2012. "Macrofinance Model of the Czech Economy: Asset Allocation Perspective," IMF Working Papers 2012/078, International Monetary Fund.
    4. Mr. Carlos I. Medeiros & Ying He, 2011. "An Assessment of Estimates of Term Structure Models for the United States," IMF Working Papers 2011/247, International Monetary Fund.

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