The Structure of Real Interest Rates in Chile

Abstract

This paper describes the structure of real interest rates (the real yield curve) in Chile and shows its evolution through time. It provides a practical tool for the systematic study of the determinants of Chilean yield curves. Empirical estimations are based on transaction and auction data for Central Bank bonds and pension recognition bonds issued by the government, applying the Nelson and Siegel method. Estimation results are used to measure the liquidity premium in the market maker’s bond yield, simulate the evolution of the very short and long-term rates, and analyze issues of Central Bank zero-coupon bonds and the response of domestic interest rates to local and international economic events.