Extraction of the Yield Curve of the Iranian Economy Using the Nelson-Siegel Model

Document Type : RESEARCH PAPER

Authors

1 Department of Theoretical Economics, Faculty of Economics, Allameh Tabatabaei University, Tehran

2 Department of Business Economics, Faculty of Economics, Allameh Tabatabaei University, Tehran

Abstract

The yield curve is recognized as one of the most important leading indicators in financial and economic analysis. This research employs the Nelson-Siegel model and data on zero-coupon government bonds (Akhza) to extract the yield curve of the Iranian economy during the period 2017-2024. The main innovation of this study, in addition to applying the Bliss weighting method to enhance fitting accuracy in short-term maturities, lies in the first empirical examination of the stylized facts of the yield curve in Iran's economy. The research findings indicate that the Iranian economy experienced three distinct yield curve patterns during this period: a downward-sloping curve during the recession-sanctions period of 2017-2019, a flat curve during transition periods in 2021-2022, and a steep upward-sloping curve during the political-economic shocks period of 2022-2024. The results of statistical tests confirm two main stylized facts: first, the existence of strong co-movement among interest rates with different maturities, confirmed by correlation coefficients exceeding 0.95; and second, the typically upward-sloping yield curve, observed in over 65% of cases. However, contrary to initial expectations, the inverse relationship between the level of short-term rates and the slope of the curve was not confirmed in Iranian data, which may indicate specific characteristics of Iran's financial market

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Main Subjects

References

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Stable Economy Journal
Volume 6, Issue 4 - Serial Number 20
December 2025
Pages 161-191

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