U.S. Dollar Swap Yields: An Analysis of the Dynamics of Monthly Changes
John Maynard Keynes asserted that the central bank sways the long-term interest rate through the influence of its policy rate on the short-term interest rate. Recent empirical research shows that Keynes’s conjecture holds for long-term Treasury yields in the United States. This article investigates whether Keynes’s claim also holds for the monthly changes in U.S.-dollar-denominated long-term swap yields by econometrically modeling its dynamics using an autoregressive distributed lag (ARDL) approach. The econometric modeling reveals that there is a statistically significant effect of the monthly changes in the Treasury bill rate on the monthly changes in swap yields of different maturity tenors after controlling for a host of macroeconomic and financial control variables. The findings from the econometric models that are estimated render a perspicacious Keynesian perspective on key policy questions and contemporary debates in macroeconomics and finance.
Akram, T., & Mamun, K. (2023). US dollar swap yields: An analysis of the dynamics of monthly changes. Journal of Economic Issues, 57(2), 522-531. Doi: 10.1080/00213624.2023.2201797