Interest Rate Spillovers from the United States: Expectations, Term Premia and Macro-Financial Vulnerabilities

19 Pages Posted: 23 Oct 2019

See all articles by Aaron N. Mehrotra

Aaron N. Mehrotra

Bank for International Settlements (BIS)

Richhild Moessner

Bank for International Settlements (BIS)

Chang Shu

Chief Asia Economist, Bloomberg

Multiple version iconThere are 2 versions of this paper

Date Written: 2019

Abstract

We analyse how movements in the components of sovereign bond yields in the United States affect long-term rates in 10 advanced and 21 emerging economies. The paper documents significant global spillovers from both the expectations and term premia components of long-term rates in the United States. We find that spillovers to domestic long-term rates in emerging economies from the US expectations components tend to be more sizeable than those from the US term premia. Finally, spillovers from US term premia are larger when an emerging economy displays greater macro-financial vulnerabilities.

Keywords: interest rate spillovers, term premia, emerging economies

JEL Classification: E520, E430, F420, F650

Suggested Citation

Mehrotra, Aaron N. and Moessner, Richhild and Shu, Chang, Interest Rate Spillovers from the United States: Expectations, Term Premia and Macro-Financial Vulnerabilities (2019). CESifo Working Paper No. 7896, Available at SSRN: https://ssrn.com/abstract=3474202

Aaron N. Mehrotra (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Richhild Moessner

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Chang Shu

Chief Asia Economist, Bloomberg ( email )

731 Lexington Avenue
New York, NY 10022
United States

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