Non-linearities and persistence in US long-run interest rates

Guglielmo Maria Caporale, Luis A. Gil-Alana, Miguel Martin-Valmayor

This note examines the stochastic behaviour of US monthly 10-year government bond yields. Specifically, it estimates a fractional integration model suitable to capture both persistence and non-linearities, these being two important properties of interest rates. Two series are analysed, one from Bloomberg including end-of-the-month values over the period January 1962-August 2020, the other from the ECB reporting average monthly values over the period January 1900-August 2020. The estimation results indicate that both are highly persistent and exhibit non-linearities, the latter being more pronounced in the case of the ECB series.

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Year of publication:	December 2020
Authors:	Caporale, Guglielmo Maria ; Gil-Alaña, Luis A. ; Martin-Valmayor, Miguel
Publisher:	Munich, Germany : CESifo, Center for Economic Studies & Ifo Institute
Subject:	long-term interest rates \| government bond yields \| fractional integration \| persistence \| non-linearities \| Zins \| Interest rate \| Zeitreihenanalyse \| Time series analysis \| Zinsstruktur \| Yield curve \| USA \| United States \| Öffentliche Anleihe \| Public bond \| Schätzung \| Estimation \| Nichtlineare Regression \| Nonlinear regression \| Kapitaleinkommen \| Capital income \| Prognoseverfahren \| Forecasting model \| Kointegration \| Cointegration