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Author
Janus Jakub (Cracow University of Economics, Poland)
Title
Long-term Sovereign Interest Rates in Czechia, Hungary and Poland: a Comparative Assessment with an Affine Term Structure Model
Source
Statistics in Transition, 2022, vol. 23, nr 1, s. 153-171, tab., wykr., bibliogr. 36 poz.
Keyword
Premia, Ryzyko, Ryzyko stopy procentowej, Gospodarka
Bonus, Risk, Interest rate risk, Economy
Note
summ.
Country
Polska, Republika Czeska, Węgry
Poland, Czech Republic, Hungary
Abstract
This paper provides a comparative evaluation of the behaviour of long-term sovereign yields in Czechia, Hungary and Poland from 2001 to 2019. An affine term structure model developed by Adrian, Crump and Moench (2013) is used as an empirical framework for the decomposition of the bond yields into term premium and risk-neutral components. We document a substantial compression in term premia which started in Central European economies around 2013 and played a decisive role in the changes that occurred in 10-year sovereign yields. This pattern, however, was more prevalent in Czechia and Poland than in Hungary. We show that long-term rates in all three economies remained higher than in Germany due to relatively large risk-neutral components. Nevertheless, cross-country correlations became increasingly dependent on term premium dynamics, both among Central European economies and between each of them and Germany. These results are robust to bias-correction in the baseline models and interpreted in the light of the general interest rates decline in the global economy. Potential policy implications are also discussed. (original abstract)
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The Main Library of the Cracow University of Economics
The Library of Warsaw School of Economics
The Library of University of Economics in Katowice
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Bibliography
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ISSN
1234-7655
Language
eng
URI / DOI
http://dx.doi.org/10.21307/stattrans-2022-009
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