Determinants of Japanese Yen interest rate swap spreads: Evidence from a smooth transition vector autoregressive model

Huang, Ying Sophie; Chen, Carl R.; Camacho, Máximo

doi:10.1002/fut.20281

Cited by 12 publications

(3 citation statements)

References 28 publications

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“…Minton, 1997; Lekkos and Milas, 2001; Asgharian and Karlsson, 2008). In addition, Lekkos and Milas (2001), Brown et al (2002), Fang and Muljono (2003), Huang et al (2008), and Chung and Chan (2010) indicate that there is a positive relationship between the liquidity premium and swap spreads. Duffie and Singleton (1997), Minton (1997), Lekkos and Milas (2001), Fang and Muljono (2003), and Chung and Chan (2010) present that the credit risk has a positive impact on swap spreads.…”

Section: Introductionmentioning

confidence: 99%

Spillovers of international interest rate swap markets and stock market volatility

Lee

Hsu

Chien

2016

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Purpose The purpose of this paper is to investigate volatility spillovers across the interest rate swap markets of the G7 economies, and then the authors investigate whether spillovers of swap markets contain useful information to explain subsequent stock price movements. Design/methodology/approach This study uses the short- and long-term swap spread volatility of the G7 countries to explore the spillover effects of international swap markets, and then investigates the relationship between swap and stock markets. The authors use the generalized VAR approach suggested by Diebold and Yilmaz (2012) to study spillovers of international swap markets. The Granger-causality tests are employed to examine the linkage of interest rate swap and stock markets. Findings This paper shows that a moderate spillover effect exists for the short- and long-term swap markets. Moreover, the results show that the short- and long-term swap markets of France and Germany have a larger impact on other countries’ swap markets than that of other countries’ swap markets on the French and German swap markets. Finally, the results indicate that the total volatility spillovers for the long-term swap markets have a larger influence on the total volatility spillover index of stock markets and the global stock market volatility than that of the short-term swap markets. Originality/value Prior literature has used impulse response and variance decomposition analyses to investigate international swap markets linkages. However, the results depend on the ordering of variables. This study uses the framework of Diebold and Yilmaz (2012) to overcome the ordering issue, and thus the authors can compute directional spillovers. This paper is the first study to explore the linkage of the total volatility spillover of swap markets and the stock markets.

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Section: Introductionmentioning

confidence: 99%

Spillovers of international interest rate swap markets and stock market volatility

Lee

Hsu

Chien

2016

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“…The study of interest rate determinants developed due to the variability of interest rate in the financial sector. Ying, Carl, and Maximo (2008) analyze the determinants of the Japanese Yen interest rate swap spread. They used a smooth transition vector autoregressive (STVAR) impulse response function model to estimate weekly data from August 8, 1997, to April 15, 2005.…”

Section: Literature Reviewmentioning

confidence: 99%

Macroeconomic Determinants of Interest Rate Volatility in Indonesia: A Structural VAR Analysis

Salim

2019

International Journal of Applied Economics, Finance and Account

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The determination of interest rates is not only influenced by inflation rate but also the sharing of factors of other macroeconomic variables. The study of the determinants interest rate has developed based on the variability and the methodological concept. Since the purpose of this study is to analyze the effect of macroeconomic variables on the interest rate volatility in Indonesia, we apply ordinary least square to estimates the empirical model of interest rate determinants statically, and the structural VAR analysis dynamically. The result of the estimation reveals that the coefficient estimates of money supply, exchange rate, and the GDP growth have negative and significant effect in the long-run. However, the risk premium shock has positive and significant effect on the interest rate and inflation rate in Indonesia.

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“…This is due to the fact that a shock at time t not only has an effect on the actual value of the i-th variable, but it can also push the system from a regime into another and thus modify the dynamic response at t +1, and so on. In the linear framework, future shocks are usually set to zero for convenience, because the expectation of the path of X after a shock, conditional on future shocks, is equal to the path of the variable when future shocks are set to their expected values (Huang et al, 2008). But this is not the case in the asymmetric framework, where shocks cannot be set to zero, although they can be treated as random realisations from the same stochastic process that generated X t { }.…”

Section: Symmetric and Asymmetric Shocks: Impulse-response Analysismentioning

confidence: 99%

Current Account Sustainability in Brazil

Mello

Mogliani

2009

OECD Economics Department Working Papers

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The possibility that a country's external current account may adjust nonlinearly to shocks is attracting increasing attention in the empirical literature. To shed further light on this issue in the context of emerging-market economies, this paper uses Brazilian data to estimate the determinants of the current account in a smooth-transition vector-autoregressive (ST-VAR) setting. We allow for the transition parameters and the model coefficients to be estimated simultaneously by non-linear constrained maximum likelihood. We find strong evidence of non-linearity in the VAR when (lagged) government consumption and investment are used as the variables governing transition across regimes. The computation of non-linear impulse response functions suggests that the system's history, as well as the sign and magnitude of shocks, affect the current account's responses to exogenous changes in income, government consumption and investment. In particular, responses to fiscal shocks depend on whether they are positive or negative and whether they follow periods of fiscal expansions or contractions. Current account responses to a positive fiscal impulse are much stronger when conditioned on periods of fiscal expansion (rising government consumption) than retrenchment. The importance of conditioning history and the magnitude of shocks in the current account's response to shocks is confirmed by forecast error variance decomposition analysis.

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Determinants of Japanese Yen interest rate swap spreads: Evidence from a smooth transition vector autoregressive model

Cited by 12 publications

References 28 publications

Spillovers of international interest rate swap markets and stock market volatility

Spillovers of international interest rate swap markets and stock market volatility

Macroeconomic Determinants of Interest Rate Volatility in Indonesia: A Structural VAR Analysis

Current Account Sustainability in Brazil

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