International dynamic linkages across government bond yield curves

• Main Author: Πομώνης, Παναγιώτης
• Other Authors: Pomonis, Panagiotis
• Language: English
• Published: 2022
• Subjects: Term structure; Yield curve; Κρατικά ομόλογα; Καμπύλες αποδόσεων

We create a framework by which, we estimate parsimonious models, developed across the literature, in order to create yield curves which represent the Term Structure of Interest Rates. We combine data considering daily government securities of Greece and Germany. We use generated yields to create vector autoregressive processes which enable us to uncover cross-country linkages. We deploy F-Granger causality tests and use RMSE and MAE metrics for in-sample and out-of-sample performance comparison. Our models fit the data satisfactorily and the acquired forecast error metrics indicate superior prediction performance. We found evidence that german yield changes enable us to predict future greek yield fluctuations.