An Application of an Unrestricted Vector Autoregressive System in the Term Structure of the US Interest Rates. Evidence from Short, Medium and Long-Term Yields of the US Interest Rates

In this article, we are investigating the effects of macroeconomic variables logarithmic returns, namely seasonally adjusted money supply, M1), total index of industrial production, (IP) and seasonally adjusted of total consumer credit outstanding, (CCO), on the logarithmic mean monthly returns of the US term structure of interest rates. We have applied an Unrestricted Vector Autoregressive system to check for exogeneity tests, impulse- responses and variance decompositions of the macro factors on the logarithmic mean returns of 3 month, 5 year and 10 year Treasury with constant maturities. Impulse – responses showed that the magnitude of the time series shock, positive or negative among two variables gradually decrease and, then, dies off slowly, as the time passes away or as the periods increases. Variance decompositions showed that macro factors variance increase or decrease in percentage terms in relation to the monthly mean returns of the US interest rates. The data that we have used are monthly returns starting from 01/01/1990 to 01/01/2013, which total to 276 observations. The data was obtained from the Federal Reserve Statistical Release Department and the symbols of the series are H.6, G.17, G.19, and H.15