The Federal Reserve Board eagle logo links to Board's home page

International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page International Capital Flows and U.S. Interest Rates
Francis E. Warnock; Veronica C. Warnock
2005-840  (September 2005)

Abstract:  Foreign flows have an economically large and statistically significant impact on long-term interest rates. Controlling for various macroeconomic factors we estimate that had there been no foreign flows into U.S. bonds over the past year, the 10-year Treasury yield would currently be 150 basis points higher; even a step-down to average inflows would imply an increase of 105 basis points. The impact of the headline-making foreign official flows -- a relatively small subset of total foreign accumulation of U.S. bonds -- is also significant but markedly smaller. Our results are robust to a number of alternative specifications.

Full paper, latest version (176 KB PDF) | Full paper (screen reader version)

Keywords
Bond yields, Japan, China

PDF files: Adobe Acrobat Reader   ZIP files: PKWARE

Home | IFDPs | List of 2005 IFDPs
Accessibility | Contact Us
Last update: October 24, 2008