The news correspondents obtained a quote from the research, "We also show that, for an explanation of country-specific movements in yield curves, local factors are required. Although we implement a very general factor structure, we find that our global factors are related to global inflation and global economic activity, whereas local factors are closely linked to monetary policy rates. In this respect, our results are similar to previous work. But an important advantage of our joint international model is that we are able to decompose interest rates into risk-free rates and risk premia. Additionally, we are able to study the implications for exchange rates."
According to the news reporters, the research concluded: "We show that whereas differences in risk-free rates matter, to a large extent, changes in the exchange rate are determined by time-varying exchange rate risk premia."
For more information on this research see: A Global Model Of International Yield Curves: No-arbitrage Term Structure Approach.
Our news journalists report that additional information may be obtained by contacting I. Kaminska,
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