Macrofinance Model of the Czech Economy: Asset Allocation Perspective
March 1, 2012
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Summary
The paper developes a VAR macrofinance model of the Czech economy. It shows that yield misalignments from the yields implied by the macrofinance model partially determine subsequent yield changes over three to nine months. These yield misalignments tend to persist for a number of months. This persistence of the misalignments was explained by (a) the fact that the macro-economy influences asset markets only at lower frequencies, (b) the liquidity effect particularly during the times of capital inflows to Czech Republic, and (c) the fact that not all misalignments were greater than their historical one standard deviation.
Subject: Financial institutions, Financial markets, Financial services, Industrial production, Inflation, Prices, Production, Sovereign bonds, Stock markets, Yield curve
Keywords: fair value, finance model, Global, Industrial production, Inflation, inflation rate, investment purpose, macrofinance modeling, slope factor, Sovereign bonds, Stock markets, vector auto-regression model, WP, yield change, Yield curve, yield curve modeling
Pages:
49
Volume:
2012
DOI:
Issue:
078
Series:
Working Paper No. 2012/078
Stock No:
WPIEA2012078
ISBN:
9781475502305
ISSN:
1018-5941
