A GARCH Approach to Modeling Chilean Long-Term Swap Yields

Authors

Tanweer Akram, Citibank
Khawaja Mamun, Sacred Heart UniversityFollow

Document Type

Article

Publication Date

5-2022

Abstract

This paper econometrically models the dynamics of the Chilean interbank swap yields based on macroeconomic factors. It examines whether the month-over-month change in the short-term interest rate has a decisive influence on the long-term swap yield after controlling for other factors, such as the change in inflation, change in the growth of industrial production, change in the log of the equity price index, and change in the log of the exchange rate. It applies the generalized autoregressive conditional heteroskedasticity (GARCH) approach to model the dynamics of the long-term swap yield. The change in the short-term interest rate has an economically meaningful and statistically significant effect on the change of the interbank swap yield. This means that the Banco Central de Chile’s (BCCH) monetary policy exerts an important influence on interbank swap yields in Chile.

Comments

JEL Classifications: E43; E50; E58; E60; G10; G12

Data Set available here as an additional file.

Working Paper No. 1008, downloaded from the Levy Economics Institute of Bard College. The Levy Economics Institute Working Paper Collection presents research in progress by Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals.

https://www.levyinstitute.org/publications/a-garch-approach-to-modeling-chilean-long-term-swap-yields

Recommended Citation

Akram, T., & Mamun, K. (2022). A GARCH approach to modeling Chilean long-term swap yields. (Levy Economics Institute Working Papers No. 1008). https://www.levyinstitute.org/pubs/wp_1008.pdf

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