Variables, proxies, and instruments description
| Variables/Proxy | Description | Sign hypothesis |
|---|---|---|
| Slope (SLOPE) | The difference of Yield 10 year and Yield 1 year (Yield 10 year-Yield 1 year) | Dependent Variable |
| Curvature (CURV) | The difference of Slope 10–5 Year and Slope 5–1 year: ((Yield 10 Year-Yield 5 year) -(Yield 5 year-yield 1 year)) | Dependent Variable |
| Level of yield (Y1/Y5/Y10) | Generic version of Sovereign Bond: yield of a bond with a tenor of 1 year; Y1, a yield of a bond with a tenor 5-year yield; Y5 and yield of a bond with a tenor of 10 Years; Y10 | Positive/negative |
| Interest rate expectation, two proxies: (1) Inflation-INF and (2) Central bank policy rate-CBRate | Inflation: Monthly Year on Year (y/y) changes of Consumer Price Index, inflation rate (=log (CPIt/CPIt−1) CBRate: end of month Central Bank policy rate | Positive |
| Growth (GROWTH) | Monthly Year on Year (y/y) real gross domestic product-GDP change =(log (GDPt/GDPt−1). GDP is interpolated from quarterly frequency to monthly | Instruments |
| Foreign exchange rate changes (FX_C) | Monthly (month-on-month changes of the foreign exchange rate (=log (FXt/Fxt−1) where each exchange rate (FX) is expressed as X local currency per USD | Positive |
| Fiscal condition, two proxies: (1) Fiscal balance-FIS_BAL and (2) Government debt-GOV_DEBT | Fiscal Balance: Fiscal Balance as percentage GDP (Interpolated from annual frequency to monthly using sum match last criteria) Government Debt: Government Debt as a percentage GDP (Interpolated from annual frequency to monthly using sum match last criteria) | Positive |
| Global uncertainty | Log (Volatility Index-VIX): VIX is implied volatility derived from the price of options on the SP500 index | Instruments |
| Variables/Proxy | Description | Sign hypothesis |
|---|---|---|
| Slope (SLOPE) | The difference of Yield 10 year and Yield 1 year (Yield 10 year-Yield 1 year) | Dependent Variable |
| Curvature (CURV) | The difference of Slope 10–5 Year and Slope 5–1 year: ((Yield 10 Year-Yield 5 year) -(Yield 5 year-yield 1 year)) | Dependent Variable |
| Level of yield (Y1/Y5/Y10) | Generic version of Sovereign Bond: yield of a bond with a tenor of 1 year; Y1, a yield of a bond with a tenor 5-year yield; Y5 and yield of a bond with a tenor of 10 Years; Y10 | Positive/negative |
| Interest rate expectation, two proxies: (1) Inflation-INF and (2) Central bank policy rate-CBRate | Inflation: Monthly Year on Year (y/y) changes of Consumer Price Index, inflation rate (=log (CPIt/CPIt−1) | Positive |
| Growth (GROWTH) | Monthly Year on Year (y/y) real gross domestic product-GDP change =(log (GDPt/GDPt−1). GDP is interpolated from quarterly frequency to monthly | Instruments |
| Foreign exchange rate changes (FX_C) | Monthly (month-on-month changes of the foreign exchange rate (=log (FXt/Fxt−1) where each exchange rate (FX) is expressed as X local currency per USD | Positive |
| Fiscal condition, two proxies: (1) Fiscal balance-FIS_BAL and (2) Government debt-GOV_DEBT | Fiscal Balance: Fiscal Balance as percentage GDP (Interpolated from annual frequency to monthly using sum match last criteria) | Positive |
| Global uncertainty | Log (Volatility Index-VIX): VIX is implied volatility derived from the price of options on the SP500 index | Instruments |
Source(s): Bloomberg, CEIC and IMF. This table describes measurement of all variables used in the study
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