Original scientific paper

https://doi.org/10.22598/zefzg.2025.1.21

The possibility of identifying factors influencing the dynamics of the yield curve in the Croatian financial market

Zrinka Orlović orcid.org/0000-0003-2508-2658 ; Ekonomski fakultet Sveučilišta u Zagrebu, Zagreb, Hrvatska *

* Corresponding author.

Abstract

This study employs principal component analysis to identify factors influencing yield curve dynamics in the Croatian financial market. Zero-coupon yields used for the analysis are estimated based on parameters from the Nelson-Siegel model for government securities with and without currency clauses from April 2006 to December 2022. Results indicate that three factors, level, slope, and curvature, adequately explain yield curve movements, aligning with findings for market zero-coupon yields and existing literature. Obtained results showed it is possible to apply principal component analysis in context of yield curve in less developed and less liquid financial market. The results are consistent with findings from developed financial markets, where the level and slope are main factors used to explain yield curve movements.

Keywords

principal component analysis; yield curve; Croatian financial market; emerging market

Hrčak ID:

333174

URI

https://hrcak.srce.hr/333174

Publication date:

3.7.2025.

Visits: 528 *