João Marcelo T. do Amaral
Master's – Global and regional factors on the term structure of interest rates: the case of Latin America
Advisor: Prof. Dr. Rodrigo de Losso da Silveira Bueno
Comission: Profs. Drs Fernando Fernandes Neto, Juliana Inhasz and Emerson Fernandes Marçal
Class: 215, FEA-5
In this work we propose to study the degree of integration of the term structure of interest rate of Latin America countries with global and regional markets. Using dynamic factor models as Diebold, Li e Yue (2008) and Bae e Kim (2011) to extract the global, regional and country specific factors we found that the term structure of interest rates of Latin America countries is integrated with global and regional markets. This result is robust studying different sample periods. However, the proportion of variance explained by those factors change when the sample periods change. This variation in the proportion of variance can be understood as consequence of the post crises period and the unconventional monetary policy that followed. Brazil term structure doesn’t seem to be affected to global components. We interpret this last result as being a consequence of the different economic cycle that the country had comparing to the rest of the world.
*Abstract provided by the author