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Testing the expectations theory of the term structure of interest rates in threshold models

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Clements, Michael P. and Galvão, Ana Beatriz C. (Ana Beatriz Camatari). (2003) Testing the expectations theory of the term structure of interest rates in threshold models. Macroeconomic Dynamics, Vol.7 (No.4). pp. 567-585. ISSN 1365-1005

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Official URL: http://dx.doi.org/10.1017/S1365100502020163

Abstract

We test the expectations theory of the term structure of U.S. interest rates in nonlinear systems. These models allow the response of the change in short rates to past values of the spread to depend upon the level of the spread. The nonlinear system is tested against a linear system, and the results of testing the expectations theory in both models are contrasted. We find that the results of tests of the implications of the expectations theory depend on the size and sign of the spread. The long maturity spread predicts future changes of the short rate only when it is high.

Item Type:

Journal Article

Subjects:

H Social Sciences > HB Economic Theory

Divisions:

Faculty of Social Sciences > Economics

Library of Congress Subject Headings (LCSH):

Interest rates -- United States -- Econometric models, Rational expectations (Economic theory), Economic forecasting -- United States, Nonlinear systems

Journal or Publication Title:

Macroeconomic Dynamics

Publisher:

Cambridge University Press

ISSN:

1365-1005

Official Date:

September 2003

Dates:

Date	Event
September 2003	Published

Volume:

Vol.7

Number:

No.4

Page Range:

pp. 567-585

Identification Number:

10.1017/S1365100502020163

Status:

Peer Reviewed

Access rights to Published version:

Open Access

Funder:

Economic and Social Research Council (Great Britain) (ESRC)

Grant number:

L138251009 (ESRC)

References:

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