The Empirics of Canadian Government Securities Yields

Levy Economics Institute, Working Papers Series

37 Pages Posted: 10 Feb 2020

See all articles by Tanweer Akram

Tanweer Akram

General Motors

Anupam Das

Mount Royal University - Department of Economics

Date Written: January 16, 2020

Abstract

Keynes argued that the short-term interest rate is the main driver of the long-term interest rate. This paper empirically models the relationship between short-term interest rates and long-term government securities yields in Canada, after controlling for other important financial variables. The statistical analysis uses high-frequency daily data from 1990 to 2018. It applies both the cointegration technique and Granger causality within the vector error correction (VEC) framework. The empirical results suggest that the action of the monetary authority is an important determinant of Canadian government securities yields, which supports the Keynesian perspective. These findings have important implications for investors, financial analysts, and policymakers.

Keywords: Canadian Government Bond Yields, Long-Term Interest Rate, Short-Term Interest Rate, Monetary Policy, Cointegration, Granger Causality

JEL Classification: E43, E50, E60, G10, G12

Suggested Citation

Akram, Tanweer and Das, Anupam, The Empirics of Canadian Government Securities Yields (January 16, 2020). Levy Economics Institute, Working Papers Series. Available at SSRN: https://ssrn.com/abstract=3520906 or http://dx.doi.org/10.2139/ssrn.3520906

Tanweer Akram (Contact Author)

General Motors ( email )

300 Renaissance Center
Detroit, MI 48243

Anupam Das

Mount Royal University - Department of Economics ( email )

4825 Mount Royal Gate SW
Calgary, T3E 6K6
Canada

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