Fischer, Manfred M. ORCID: https://orcid.org/0000-0002-0033-2510 and Hauzenberger, Niko and Huber, Florian
ORCID: https://orcid.org/0000-0002-2896-7921 and Pfarrhofer, Michael
ORCID: https://orcid.org/0000-0002-0168-688X
(2022)
General Bayesian time-varying parameter VARs for
modeling government bond yields.
Working Papers in Regional Science, 2021/01.
WU Vienna University of Economics and Business, Vienna.
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Abstract
US yield curve dynamics are subject to time-variation, but there is ambiguity on its precise form. This paper develops a vector autoregressive model with time-varying parameters and stochastic volatility which treats the nature of parameter dynamics as unknown. Coefficients can evolve according to a random walk, a Markov switching process, observed predictors or depend on a mixture of these. To decide which is supported by the data, we adopt Bayesian shrinkage priors to carry out model selection. Our framework is applied to model the US yield curve. We show that the model forecasts well, and focus on selected in-sample features to analyze determinants of structural breaks in US yield curve dynamics.
Item Type: | Paper |
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Keywords: | Bayesian shrinkage, interest rate forecasting, latent effect modifers, MCMC sampling |
Classification Codes: | JEL C11, C32, E43, E47 |
Divisions: | Departments > Sozioökonomie > Wirtschaftsgeographie und Geoinformatik |
Depositing User: | ePub Administrator |
Date Deposited: | 22 Feb 2021 14:27 |
Last Modified: | 30 May 2022 10:37 |
URI: | https://epub.wu.ac.at/id/eprint/8006 |
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