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An empirical analysis of the relationship between US and Colombian long-term sovereign bond yields

In: The transmission of unconventional monetary policy to the emerging markets

Author

Listed:
  • Alexander Guarín

    (Bank of the Republic (Colombia))

  • José Fernando Moreno

    (Bank of the Republic (Colombia))

  • Hernando Vargas

    (Bank of the Republic (Colombia))

Abstract
We study the relationship between US and Colombian sovereign debt interest rates between 2004 and 2013. We also evaluate the response of the Colombian long-term bond yield and other asset prices to shocks to the US long-term Treasury rate. Two empirical exercises are performed. First, we use a moving window linear regression to examine the link between sovereign bond yields. Second, we estimate a VARX-MGARCH model to compute the short-term response of local asset prices to foreign financial shocks. Our exercises consider data with daily frequency. The analysis is performed on three sample periods (i.e., before, during, and after the global financial crisis). Our findings show that the link between sovereign bond yields has changed over time. Moreover, the short-run responses of local asset prices to foreign financial shocks have been qualitatively different in the three periods. The especial role of US Treasuries as a “safe haven asset” during highly volatile time spans seems to be at the root of these changes. ****** En este documento se estudia la relación entre las tasas de interés de la deuda pública de Estados Unidos y Colombia entre 2004 y 2013. También se evalúa la respuesta de la tasa de los bonos colombianos de largo plazo y el precio de otros activos locales a choques a la tasa de los bonos del Tesoro de los Estados Unidos. Se llevan a cabo dos ejercicios empíricos. Primero, se usa un modelo de regresión lineal con ventanas móviles para examinar la relación entre las tasas de interés de los bonos de ambos países. Segundo, se estima un modelo VARX-MGARCH para calcular la respuesta de corto plazo de los precios de activos locales frente a choques financieros externos. Estos ejercicios consideran datos con frecuencia diaria. El análisis es realizado para tres periodos (es decir, antes, durante y después de la crisis financiera global). Los resultados muestran que la relación entre las tasas de interés de los bonos soberanos ha cambiado a través del tiempo. Ad
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Alexander Guarín & José Fernando Moreno & Hernando Vargas, 2014. "An empirical analysis of the relationship between US and Colombian long-term sovereign bond yields," BIS Papers chapters, in: Bank for International Settlements (ed.), The transmission of unconventional monetary policy to the emerging markets, volume 78, pages 129-158, Bank for International Settlements.
    • Handle: RePEc:bis:bisbpc:78-09
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    Cited by:

    1. Tomas Heryan & Jan Ziegelbauer, 2016. "Volatility Of Yields Of Government Bonds Among Giips Countries During The Sovereign Debt Crisis In The Euro Area," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 11(1), pages 61-74, March.
    2. Carlos Alberto Cuadros Lara, 2015. "Descomposicion de la estructura a terminos de la tasa de interes de los bonos soberanos de Estados Unidos y Colombia," Revista de Economía del Rosario, Universidad del Rosario, vol. 18(2), pages 309-342, December.
    3. Diego Alejandro Martínez Cruz & José Fernando Moreno Gutiérrez & Juan Sebastián Rojas Moreno, 2015. "Evolución de la relación entre bonos locales y externos del gobierno colombiano frente a choques de riesgo," Borradores de Economia 919, Banco de la Republica de Colombia.
    4. Juan Andrés Espinosa Torres & Luis Fernando Melo Velandia & José Fernando Moreno Gutiérrez, 2014. "Estimación de la prima por vencimiento de los TES en pesos del gobierno colombiano," Borradores de Economia 854, Banco de la Republica de Colombia.
    5. Juan Camilo Anzoátegui Zapata & Juan Camilo Galvis, 2019. "Efectos de la comunicación del banco central sobre los títulos públicos: evidencia empírica para Colombia," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 38(77), pages 337-364, July.
    6. Espinosa-Torres, Juan Andrés & Gomez-Gonzalez, Jose Eduardo & Melo-Velandia, Luis Fernando & Moreno-Gutiérrez, José Fernando, 2016. "The international transmission of risk: Causal relations among developed and emerging countries’ term premia," Research in International Business and Finance, Elsevier, vol. 37(C), pages 646-654.
    7. Andrea Carolina Vargas-Páez & Carlos David Ardila-Dueñas, 2021. "Efecto del riesgo de tipo de cambio en la rentabilidad de los bonos soberanos en Colombia," Borradores de Economia 1165, Banco de la Republica de Colombia.
    8. Carlos David Ardila-Dueñas & Hernán Rincón-Castro, 2019. "¿Cómo y qué tanto impacta la deuda pública a las tasas de interés de mercado?," Borradores de Economia 1077, Banco de la Republica de Colombia.
    9. Andrew Blake & Garreth Rule & Ole Rummel, 2015. "Inflation targeting and term premia estimates for Latin America," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 24(1), pages 1-21, December.

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    More about this item

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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