English, Article, Journal or magazine article edition: A Macroeconomic Model of the Term Structure of Interest Rates in Mexico. Josué Fernando Cortés Espada; Manuel Ramos Francia

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Bookmark: http://trove.nla.gov.au/version/47756
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • A Macroeconomic Model of the Term Structure of Interest Rates in Mexico.
Author
  • Josué Fernando Cortés Espada
  • Manuel Ramos Francia
Physical Description
  • preprint
Notes
  • This paper investigates how different macroeconomic shocks affect the term-structure of interest rates in Mexico. In particular, we develop a model that combines a no-arbitrage specification of the term structure with a macroeconomic model of a small open economy. We find that shocks that are perceived to have a persistent effect on inflation affect the level of the yield curve. The effect on medium and long-term yields results from the increase in expected future short rates and in risk premia. With respect to demand shocks, our results show that a positive shock leads to an upward flattening shift in the yield curve. The flattening of the curve is explained by both the monetary policy response and the time-varying term premia.
  • Term-Structure, No-Arbitrage, Macroeconomic Shocks.
  • RePEc:bdm:wpaper:2008-10
Language
  • English
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