On Brazil’s Term Structure: Stylized Facts and Analysis of Macroeconomic Interactions
IMF Working Papers, May 1, 2011
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- Canonical URL
- On Brazil’s Term Structure: Stylized Facts and Analysis of Macroeconomic Interactions
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Bibliographic details
- Authors: Rodrigo Cabral, Richard Munclinger, Luiz Alves, Marco Rodriguez Waldo
- Published: May 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455261420.001
Summary and Objectives
- Characterizes the term structure of Treasury bond yields for Brazil for the period 2004-2010.
- Estimates a Nelson-Siegel Model to reproduce stylized facts of Brazil’s yield curve.
- Estimates two versions of the Nelson-Siegel Model that incorporate macroeconomic variables to assess dynamic interactions between the yield curve and the macroeconomy.
- Uses a software developed by Fund staff for estimation and analysis.
Methodology
- Primary model: Nelson-Siegel Model (base specification).
- Extended models: Two versions of the Nelson-Siegel Model augmented with macroeconomic variables (referred to as yield-macro model and model II in keywords).
- Data period: 2004-2010.
- Analytical focus: factor dynamics, curvature of the yield curve, and the data well for yield observations.
Key Findings and Analytical Focus
- The paper reproduces stylized facts of Brazil’s term structure using the Nelson-Siegel specification.
- The augmented Nelson-Siegel specifications are used to analyze dynamic interactions between yield-curve factors and macroeconomic variables.
- Subject areas explicitly addressed include:
- Central bank policy rate and target rate
- Inflation and inflation rate
- Interest rates and yield curve dynamics
- Sovereign bonds and yields on bonds
- Factor models and yield factor dynamics
- Financial institutions and financial services
Content in this bundle
- Model II-Impulse-Response Functions