Forecasting the Government's Yield Curve in the Dominican Republic : A macro-financial VAR approach to forecasting the Dominican Republic's Central Government's Yield Curve

ISBN-13: 9786139469208 / Angielski

Enrique Penson

Opis

This study develops a framework for analyzing the implicit yield curve in Dominican Republic's Central Government's bonds' transactions, reducing it two a limited set of factors that can be interpreted as intertemporal series, and then estimating a macro-financial vector-auto-regression (VAR) model in which they are forecasted along with some economic series, testing several coefficient restrictions. The study finds, first, that the structure of the Dominican Republic's yield curve can be successfully reduced to a limited set of factors that capture the intertemporal structure of spot yields that discounts each bond's future cashflows so that they correspond to its current trading price; second, the study finds that a joint macro-financial VAR framework increases forecasting power relative to separate macro and financial models, and that further theoretical and pragmatic restrictions can be made on the coefficients to augment the flexibility of the model without compromising model fit.

O autorze

Penson, Enrique
Enrique Penson received Bachelor's degree in Economics, Summa Cum Laude at Instituto Tecnológico de Santo Domingo; obtained Master's degree in Investment and Finance from Middlesex University, London, with distinction. Currently he is a Senior Economist at the Analytica firm in the Dominican Republic, and has been a consultant at the World Bank.