Yield curve dynamics with macroeconomic factors in Iberian economies

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Isabel Maldonado
Carlos Pinho



The aim of this paper is to analyse the bidirectional relation between the term structure of interest rates components and macroeconomic factors. Using a factor augmented vector autoregressive model, impulse response functions and forecasting error variance decompositions we find evidence of a bidirectional relation between yield curve factors and the macroeconomic factors, with increased relevance of yield factors over it with increased forecasting horizons. The study was conduct for the two Iberian countries using information of public debt interest rates of Spain and Portugal and macroeconomic factors extracted from a set of macroeconomic variables, including indicators of activity, prices and confidence. Results show that the inclusion of confidence and macroeconomic factors in the analysis of the relationship between macroeconomics and interest rate structure is extremely relevant. The results obtained allow us to conclude that there is a strong impact of changes in macroeconomic factors on the term structure of interest rates, as well as a significant impact factors of the term structure in the future evolution of macroeconomic factors.


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Maldonado, I., & Pinho, C. (2020). Yield curve dynamics with macroeconomic factors in Iberian economies. Global Journal of Business, Economics and Management: Current Issues, 10(3), 193–203. https://doi.org/10.18844/gjbem.v10i3.4691