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The Indonesian macroeconomy and the yield curve: A dynamic latent factor approach
| Content Provider | Semantic Scholar |
|---|---|
| Author | Djuranovik, Leslie |
| Copyright Year | 2014 |
| Abstract | We develop a fine representation of the term structure of interest rates in Indonesia and create a link between the yield curve and macroeconomic fundamentals. We construct a state-space representation of the yield curve as a function of three time-varying parameters: level, slope, and curvature factors. The model is then expanded to include three macroeconomic variables: real activity, inflation, and interest rates. We find that the dynamic latent factor model provides a very good fit to characterise the Indonesian yield curve in terms of the statistical properties for each maturity, and in terms of the properties of three latent yield-curve factors. With regards to the relationship to the macroeconomy, we find that there is a large amount of idiosyncratic variation in the yield curve movements. Therefore, macroeconomic variables can only explain small dynamics in the yield curve. |
| Starting Page | 1 |
| Ending Page | 15 |
| Page Count | 15 |
| File Format | PDF HTM / HTML |
| DOI | 10.1016/j.asieco.2014.06.001 |
| Alternate Webpage(s) | http://isiarticles.com/bundles/Article/pre/pdf/44768.pdf |
| Alternate Webpage(s) | https://doi.org/10.1016/j.asieco.2014.06.001 |
| Volume Number | 34 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
