The expectations hypothesis of the term structure: some empirical evidence for Portugal

Artur Silva Lopes () and Olga Susana M. Monteiro

MPRA Paper from University Library of Munich, Germany

Abstract: The purpose of this paper is to test the (rational) expectations hypothesis of the term structure of interest rates using Portuguese data for the interbank money market. The results obtained support only a very weak, long-run or "asymptotic" version of the hypothesis, and broadly agree with previous evidence for other countries. The empirical evidence supports the cointegration of Portuguese rates and the "puzzle" well known in the literature: although its forecasts of future short-term rates are in the correct direction, the spread between longer and shorter rates fails to forecast future longer rates. In the single equation framework, the implications of the hypothesis in terms of the predictive ability of the spread are also clearly rejected.

Keywords: term structure of interest rates; expectations hypothesis; hypothesis testing; cointegration; Portugal (search for similar items in EconPapers)
JEL-codes: C22 C32 E43 (search for similar items in EconPapers)
Date: 2007-05-31
New Economics Papers: this item is included in nep-for, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: The Expectations Hypothesis of the Term Structure: Some Empirical Evidence for Portugal (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:3437

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