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

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

By Marco Rodriguez Waldo, Carlos I. Medeiros

April 1, 2011

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Format: Chicago

Marco Rodriguez Waldo, and Carlos I. Medeiros The Dynamics of the Term Structure of Interest Rates in the United States in Light of the Financial Crisis of 2007–10, (USA: International Monetary Fund, 2011) accessed September 19, 2024

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

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.

Subject: Financial crises, Inflation, Securities, Short term interest rates, Yield curve

Keywords: Financial crisis, Term structure, WP

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/084
Stock No:

WPIEA2011084
ISBN:

9781455226047
ISSN:

1018-5941

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