A1038
Title: Dependence structure in international bond returns
Authors: Andrea Berardi - University of Venice (Italy)
Monica Billio - University of Venice (Italy)
Roberto Casarin - University Ca' Foscari of Venice (Italy)
Domenico Sartore - Ca Foscari University of Venice (Italy) [presenting]
Abstract: Bond return fluctuations across different currency areas are generally highly interrelated. However, both the contemporaneous causal relationships and the temporal dependence structure vary over time. We consider government bond returns from Australia, Canada, Germany, Japan, Switzerland, the UK and the US, and document the time-varying behaviour of the degree of connectedness among the seven currency areas. We find that the dependence structure of bond returns can be significantly different for short and long maturities. The empirical analysis is based on a Bayesian graphical VAR model, where the contemporaneous and temporal causal structures of the structural VAR are represented by two different graphs and an efficient Markov chain Monte Carlo algorithm is used to estimate jointly the two causal structures and the parameters of the reduced-form VAR model.
