The role of Regime Shifts in the Term Structure of Interest Rates: Further evidence from an Emerging Market

Burak Saltoğlu and Ege Yazgan ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we investigate the interrelations among Turkish interest rates with different maturities by using a regime switching Vector Error Correction (VECM) model. We find a long run equilibrium relationship among interest rates with various maturities. Furthermore we conclude that term structure dynamics exhibit significant nonlinearity. Forecasting experiment also reveals that the nonlinear term structure models do fare better than other linear specifications. However, we cannot conclude that interest rate adjustments are made in an asymmetric way in the long run equilibrium.

Keywords: Term Structure of Interest Rates; Regime Switching; Forecasting; Foreacast Evaluation; Cointegration (search for similar items in EconPapers)
JEL-codes: C13 C22 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ara, nep-for and nep-mon
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Related works:
Journal Article: The Role of Regime Shifts in the Term Structure of Interest Rates: Further Evidence from an Emerging Market (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:18741

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