Abstract

ABSTRACT This paper econometrically models the dynamics of Chilean government bond (CLGB) yields from a Keynesian perspective. It applies a generalized autoregressive conditional heteroscedasticity (GARCH) approach to monthly macroeconomic and financial data to examine whether the current short-term interest rate has a decisive influence on long-term CLGB yields, after controlling for key variables, such as inflation, the growth of industrial production, and the percentage changes in the equity price index, the Chilean peso’s (CLP) exchange rate, and the Banco Central de Chile’s (BCCH) total assets.

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