Asian countries' reserves impact global yield curves, shaping international financial markets.
The article explores how the term structures of bonds and equities are related. It uses a model to analyze the prices and yields of stocks and bonds, finding that the model matches the data well. However, the long-run risk-neutral mean of the short rate is not realistic. By studying the impact of Asian countries' reserve holdings on international yield curves, the researchers show that these holdings play a significant role in shaping the yield curves of several industrialized countries.