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- Title
International Yield Comovements.
- Authors
Bekaert, Geert; Ermolov, Andrey
- Abstract
We decompose long-term nominal bond yields into real and inflation components in an international context using inflation-linked and nominal bonds. In contrast to extant results, real rate variation dominates the variation in inflation-linked and nominal yields. Cross-country nominal and inflation-linked yield correlations have declined since the Great Recession. Real rates are the main source of the correlation between nominal yields. Our results are robust to various alternative measurements of inflation expectations and the liquidity premium. They continue to hold when a no-arbitrage term structure model with real, nominal, and inflation factors is used to effect the yield decomposition.
- Subjects
RATE of return on bonds; INFLATION-indexed bonds; GREAT Recession, 2008-2013; LIQUIDITY (Economics); PRICE inflation; INFLATION risk; RISK premiums; SWAPS (Finance)
- Publication
Journal of Financial & Quantitative Analysis, 2023, Vol 58, Issue 1, p250
- ISSN
0022-1090
- Publication type
Article
- DOI
10.1017/S0022109022000515