Short- and long-run behaviour of long-term sovereign bond yields |
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Authors: | António Afonso Christophe Rault |
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Institution: | 1. Department of Economics, ISEG/ULisbon – University of Lisbon, R. Miguel Lupi, 20, 1249-078 Lisbon, Portugal;2. UECE – Research Unit on Complexity and Economics, R. Miguel Lupi 20, 1249-078 Lisbon, Portugal;3. ECB, Directorate General Economics, Kaiserstra?e 29, D-60311 Frankfurt am Main, Germanyaafonso@iseg.utl.pt;5. Toulouse Business School, Toulouse, France |
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Abstract: | We assess the short- and long-run behaviour of long-term sovereign bond yields in OECD countries using a dynamic panel approach to reflect financial and economic integration. Given the existence of cross-country dependence regarding sovereign yields and its determinants, we resort to simulation and bootstrap methods. Results based on the Common Correlated Effect estimator of Pesaran and on Panel Error Correction Models to sort out short- and long-run fiscal developments show that in addition to common movements in sovereign yields, investors also consider country differences arising from specific factors (inflation, budgetary and current account imbalances, real effective exchange rates, and liquidity). |
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Keywords: | long-term yields EU financial integration panel cointegration bootstrap |
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