Mean Reversion in US and International Short Rates

Charlotte Christiansen

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: In this paper we extend the CKLS one factor short rate model to include extreme value nonlinear mean reversion. Similarly to a recent stock market study, we include the smallest short rate during the previous year in the mean equation. We investigate the US and five other major markets (Canada, Germany, Japan, Switzerland, and the UK). There is extreme value mean reversion in the US short rate. For Japan there is both linear and nonlinear mean reversion. For the remaining short rates there is no evidence of mean reversion.

Keywords: Short term interest rate; Mean reversion; Extreme value; Nonlinearity (search for similar items in EconPapers)
JEL-codes: C13 E43 G12 G15 (search for similar items in EconPapers)
Pages: 27
Date: 2008-09-02
New Economics Papers: this item is included in nep-fmk, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Mean reversion in US and international short rates (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2008-47

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