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Federal Reserve Bank of Dallas
Globalization Institute Working Papers
Mildly Explosive Dynamics in U.S. Fixed Income Markets
We use a recently developed right-tail variation of the Augmented Dickey-Fuller unit root test to identify and date-stamp periods of mildly explosive behavior in the weekly time series of seven U.S. fixed income yield spreads between September 2002 and January 2015. We find statistically significant evidence of such behavior in six of these spreads. Mild explosivity migrates from short-term funding markets to more volatile medium- and long-term markets during the Great Financial Crisis. For some markets, we statistically validate the conjecture, originally suggested by Gorton (2009a,b), that the financial panic of 2007 initially migrated from segments of the ABX market to other U.S. fixed income markets.
Cite this item
Silvio Contessi & Pierangelo De Pace & Massimo Guidolin, Mildly Explosive Dynamics in U.S. Fixed Income Markets, Federal Reserve Bank of Dallas, Globalization Institute Working Papers 324, 01 Aug 2017, revised 04 Feb 2019.
- C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
- C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
- G01 - Financial Economics - - General - - - Financial Crises
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
Keywords: Finance; investment analysis; fixed income markets; yield spreads; mildly explosive behavior
This item with handle RePEc:fip:feddgw:324
is also listed on EconPapers
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