Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
964665 | Journal of International Money and Finance | 2014 | 29 Pages |
Abstract
This paper examines the extent to which large swings of sovereign yields in euro area countries during the debt crisis can be attributed to fundamentals, focusing on the inherent uncertainty in bond yield models. We show that the outcomes are strongly affected by modelling choices with regard to i) the confidence bands for the model prediction, ii) the assumption whether the model coefficients are similar across countries or not, iii) the sample selection, iv) the inclusion of financial variables and v) the choice of time-varying coefficients. These choices affect the explanatory power of macro fundamentals and the extent of mispricing.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Leo de Haan, Jeroen Hessel, Jan Willem van den End,