Two factors along the yield curve
Article Abstract:
A two-factor yield model can be used to examine interest rate term structure. Three models each have their yield curves divided into five parts to assess whether the model fits these different parts as well as the entire term structure. One model appears to fit maturities with shorter yields and the other fits maturities with longer yields, but single two-factor models tend not to explain the structure of the entire yield. Shorter-term yields imply factors that can predict Federal Reserve targets and interest rates, while longer-term yields appear to show a mean reverting process for Federal Reserve targets though not for inflation.
Publication Name: The Manchester School of Economic and Social Studies
Subject: Social sciences
ISSN: 0025-2034
Year: 1997
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A two-factor model of the U.K. yield curve
Article Abstract:
The United Kingdom market for government securities (gilts) can be examined using a two-factor model of interest rate term structure for 1982 to 1996. The forward premium for UK long-term gilts can be decomposed into different parts showing expectations of interest rates, risk premia linked to underlying factors and terms showing the effect of changes in the factors on the forward yield curve. Research that does not locate a risk premium for UK interest rates may have neglected the variance bias.
Publication Name: The Manchester School of Economic and Social Studies
Subject: Social sciences
ISSN: 0025-2034
Year: 1997
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How do public investment and financial factors affect growth in a debt-overhang economy?
Article Abstract:
The external financing of companies may be rationed due to informational frictions. Congestion effects can result from credit rationing for private investors. Corporate productivity is affected by public infrastructure size. Rises in interest rates lead to a dynamic debt-overhang. Growth is limited due to high levels of interest repayments. The tax rate also affects corporate growth. There is an optimal interest rate level at which growth is maximized.
Publication Name: The Manchester School of Economic and Social Studies
Subject: Social sciences
ISSN: 0025-2034
Year: 1997
User Contributions:
Comment about this article or add new information about this topic:
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