Exploration of the Brazilian Term Structure in a Hidden Markov Framework

 
Author/Editor: Munclinger, Richard
 
Publication Date: January 01, 2011
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: We apply a hidden Markov model of the term structure to modeling the Brazilian swap rate curve. We examine the model's characteristics and its performance in describing the cross-sectional and time-series dynamics of the term structure. Two regimes are identified, a high level and a high volatility regime and a low level and low volatility regime. Both regimes are persistent and are explained by the level and the slope of the term structure. The model is estimated using a Bayesian MCM algorithm that produces consistent standard errors and a reliable method for testing the differences between the model parameters.
 
Series: Working Paper No. 11/22
Subject(s): Bonds | Brazil | Economic models | Interest rates

Author's Keyword(s): Term Structure | Hidden Markov Models | MCMC | ATSM | Brazil
 
English
Publication Date: January 01, 2011
Format: Paper
Stock No: WPIEA2011022 Pages: 31
Price:
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